Despite a small pull-back in October, new home construction in Alberta continues to keep pace with the expanding economy and population.
Last month, there were just over 43,000 new housing starts throughout the province. That figure is seasonally adjusted and at an annualized rate—that is, it estimates the number of new houses that would be built over an entire year if the pace of construction in October was to be maintained for twelve months. October’s figure is down slightly from September, but the longer-term trend in housing starts has been strong. Since the end of October 2013, housing starts are up almost 17 per cent compared to the previous 12-month period.
Several factors in Alberta continue to push housing starts higher. With solid employment opportunities and high wages, Alberta continues to draw in thousands of workers from other provinces and around the world. That growing population needs places to live.
Another factor is the rising cost of rental accommodation. With only a fixed number of houses or apartments for rent but growing demand, vacancy rates around the province are low. This has pushed up rents and made home ownership a relatively more attractive alternative.
The third factor is continued low interest rates. For over four years, the Bank of Canada has kept its trend-setting overnight rate at a low one per cent—and that has helped maintain favourable mortgage rates. The low cost of borrowing money has pulled more Albertans into home ownership and increased the demand for new homes.
**Article courtesy of Todd Hirsch of ATB Financial. Thanks as always Todd!!
The frenzied housing environment in both Edmonton and Calgary is expected to moderate over the next two years according to the Canada Mortgage and Housing Corporation’s (CMHC) most recent Fall Housing Market Outlook. After two years of significant gains in the new housing market, total housing starts in both cities are projected to soften through 2015 and 2016 as both employment growth and in-migration levels relax.
In Calgary, the CMHC reports that total housing starts will reach record highs (17,200 units) by the end of this year. Multi-family starts (apartments, condos, etc.) are expected to reach their highest total since 1978 and will help lift housing starts to their record highs. Total housing starts for Calgary in 2015 are forecasted to reach 14,400 and 12,800 in 2016.
Levels will moderate in Edmonton as well. Total housing starts are projected to reach 13,300 units in 2014 and then drop to 13,000 in 2015 and 12,300 in 2016. By the end of this year, the price of a new single-detached house in Edmonton is forecasted at $553,000 and $620,000 in Calgary.
The CMHC acknowledges that Alberta’s hot job market, rising wages, significant in-migration numbers and affordable mortgage rates have propelled the existing home market in Alberta’s two major cities. Demand for resale homes in Edmonton and Calgary will continue to remain robust. However, as employment and migration gains slow and interest rates rise, sales in the resale market will start to cool too. By the end of 2014, the CMHC predicts the average resale price in Edmonton to be $360,000 and $459,000 in Calgary.
**Article courtesy of Todd Hirsch of ATB Financial. Thanks Todd!!