Local home starts taper off after torrid 2012

After an impressive 2012, the Edmonton housing market will see some moderation for 2013 as new housing starts are projected to decline, according to the Canada Mortgage and Housing Corp.

“This year we are projecting a little bit of a pullback,” said Lai Sing Louie, regional economist with the federal agency.

In a report released Tuesday on the second quarter 2013 housing market outlook, the Crown corporation said this can be attributed to slower economic and job growth within the Edmonton census metropolitan area.

Compared to the 2012 increase of 37.6 per cent in new builds, 2013 will show an impressive increase from previous years — just not at the same rate.

Edmonton’s employment rate continues to climb, but at a slower pace than 2012, Louie said.

Overall, the market remains balanced as supply meets current demand.

The province will see a twoper-cent housing-start decline for this year, in tandem with a two-per-cent rise in resale home sales.

“One of the key drivers of housing demand is people who have full-time jobs, so when you get a full-time job that gives you the means to buy a house or condo,” Louie said. “When growth starts to slow down a bit, new construction also slows a bit.”

The moderation could also be caused by the timing of permits, said David Dale-Johnson, executive professor in real estate at the University of Alberta’s School of Business.

“The starts may have been issued last year and we are still seeing the units online; it is more just a timing question,” he said, adding that there is still plenty of construction going on around the city.

The report used data as of April 26, so does not reflect the impact of the recent floods in southern Alberta. Louie said CMHC will have to wait for the third quarter outlook before it can quantify the impact.

After the 2005 floods in southern Alberta, the housing market initially saw a slowdown in the affected areas, but resumed its long-term trends shortly after, Louie said.

Despite a decline in new builds for this year, the resale market is seeing growth. Although Edmonton may see less home construction this year, they are still selling.

The CMHC projects that for the next two years, resale home sales will continue to increase at a rate of four per cent for 2013 and two per cent in 2014.

“It is still healthy right now,” Louie said. “The supply is meeting demand.”

The demand for resale homes is bolstered by multiple factors. Many newcomers to Edmonton who rented in 2012 are now looking to buy in 2013. The extremely tight rental market — with vacancy rates running at under two per cent — is also enticing people to buy.

With the population, economic and job rates continuing to grow, the Multiple Listing Service sales market will continue to be fed.

“Unless there’s a major disruption in the economy, MLS listings tend to rise with rising number of households,” Louie said.

“The last time MLS sales decreased was in 2010.”