Hous­ing starts slow­ing, help­ing in­ven­tory

Calgary Herald - Calgary Herald New Condos - - Front Page - JOEL SCH­LESINGER

Hous­ing starts are slow­ing in the city, and that’s good news for the mar­ket.

Starts fell four per cent last month from Au­gust the year be­fore, based on data from Canada Mort­gage and Hous­ing Corp.

“We’ve seen that hous­ing starts have slowed sig­nif­i­cantly in the area, and this is mostly from de­vel­op­ers and builders re­spond­ing well to el­e­vated in­ven­tory lev­els,” says Heather Boyer, se­nior an­a­lyst for eco­nomics at CMHC.

Sin­gle-de­tached home starts fell by more 16 per cent, down from 403 in Au­gust 2018 to 337 last month.

How­ever, starts for all other seg­ments rose by three per cent com­pared to the same month last year (693 in 2018 ver­sus 714 last month).

Boyer notes the rise is driven by a “bit of over­build­ing” in the apart­ment seg­ment in part be­cause it is a lit­tle slower to re­spond to high in­ven­to­ries. It may also in­di­cate builders see af­ford­abil­ity as a driv­ing fac­tor and there­fore they are now build­ing more town­house-style prod­uct.

In­deed, CMHC data show row starts rose last month to

119 from 104 units the same month last year.

This in-be­tween seg­ment is typ­i­cally more pricey than apart­ment-style units, but they are less costly than sin­gle-de­tached while of­fer­ing many of its ben­e­fits like a small yard and front-street door. CMHC in­for­ma­tion fur­ther sup­ports this shift in the mar­ket, re­veal­ing that more than 90 per cent of un­ab­sorbed sin­gle-de­tached units are priced at more than $400,000.

High in­ven­to­ries per­sist in Cal­gary across most seg­ments. Although 586 sin­gle-fam­ily homes were avail­able on the mar­ket last month, more than 1,400 multi-fam­ily units — which in­cludes apart­ment, row and semi-de­tached — were avail­able for sale.

“The bulk of in­ven­to­ries are on the apart­ment side in Cal­gary,” Boyer says, adding in­ven­to­ries are gen­er­ally very high com­pared with longterm aver­age lev­els.

The cur­rent con­di­tions of­fer buy­ers plenty of op­tions due to com­pe­ti­tion from the re­sale side as well.

“There are def­i­nitely lots of op­tions for buy­ers whether it’s in sin­gle-de­tached homes or con­do­minium apart­ments,” Boyer says.

“In the re­sale mar­ket, we’re still see­ing a bit of buy­ers’ mar­ket con­di­tions.”

She adds prices in the re­sale con­tinue to fall year over year.

“With the down­ward pres­sure on prices, it’s tougher for sell­ers who don’t have the same lee­way as buy­ers to ne­go­ti­ate,” she says. “It’s also not a very quick mar­ket in the sense that some prop­er­ties are sit­ting on the mar­ket longer.”

Yet Boyer notes the mar­ket could be mov­ing more to­ward bal­ance as eco­nomic indi­ca­tors im­prove, in­clud­ing em­ploy­ment. Un­em­ploy­ment may have jumped in Au­gust to

7.3 per cent in Cal­gary from July (6.9 per cent). But the num­ber of em­ployed peo­ple in the city in­creased last month by 6.7 per cent com­pared with the same month in 2018.

Ad­di­tion­ally, the num­ber of un­em­ployed fell by 4.7 per cent in Au­gust, year over year, based on the same Sta­tis­tics Canada data.

“Com­pared with pre­vi­ous years, we’re see­ing im­prove­ment in em­ploy­ment lev­els,” Boyer says. “So the fun­da­men­tals be­hind hous­ing de­mand are start­ing to strengthen.”

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