Mid-year forecast calling for more supply, added choices
Mario DeMarco thought he was prepared for anything after deciding to become a first-time homeowner.
The 25-year-old Calgarian has spent the past two years saving for a down payment, and was recently promoted at work, giving him the financial stability to purchase his own place – ideally a condo in the Beltline.
“I had also decided to enter the market because the cost of a monthly mortgage payment now is very similar to rent, except with a mortgage I am building equity,” said DeMarco, who is still looking for a place to call home.
Yet in searching for that first home, DeMarco came face to face with something he never thought he would in Calgary: choice.
“I feared that I would not find much selection in my range, but I have been happily mistaken,” he said.
DeMarco’s experience reflects a recent shift by Calgary’s hot resale housing market into more balanced conditions, according to CREB’s® recently released Mid-Year Forecast Update.
“The current housing market has recorded double-digit sales growth which has outpaced the growth in new listings, keeping the overall market in sellers’ conditions,” said CREB® Chief Economist Ann-Marie Lurie. “However, there is a notable shift in the trend as some markets, including the condominium apartment sector have already moved toward more balanced conditions.”
CREB® president Bill Kirk said forecasting a more balanced market should not be a surprise given a number of condo projects have come on stream as of late.
“We usually have a sales bump in February, March, April, May,” he said. “With lead times for home possessions being two months or so, most buyers want to be in the house before the summer vacation so their kids start September in a new school.”
The tight resale market, when combined with rising prices, has also supported Calgary’s new home sector. After the first five months of 2014, total starts reached 6,887 units, a 48 per cent increase compared to the same period the year prior, according to CREB®.
The gains are related to the surge in multi-family starts and continued gains in the single-family sector. Overall, the Conference Board of Canada forecasts starts to increase by 14.7 per cent by the end of 2014 for a total of 14,437 units. Half of those starts are expected to be multi family product.
Lurie expressed some caution as it relates to an increase in inventory.
“The concern often arising with rising inventory is potential oversupply and the impact on prices,” she said. “Improving inventory levels signal that the market is easing.
However, due to the strong economic fundamentals, any significant reversal of the previous price gains is considered unlikely.”
At the recent release of the 2014 Civic Census, Calgary Mayor Naheed Nenshi said he’d like to see more new homes in the city.
“Last year, [development] was 58 per cent in new communities, 42 per cent in developed communities,” Nenshi said. “Certainly in the last decade, we were still looking at greater than 100 per cent of growth in newer communities, so shifts are happening quickly. That said, housing starts are still a bit lower than I would like to see.”
With attractive employment opportunities, Calgary once again saw record growth in net migration with 28,017 more people moving into the city than moving out, according to the census. Calgary’s population has reached 1,195, 194 – an increase of 38,508 residents and a record year of growth for the city.
“Strong net migration, rising wages, and low interest rates supported much of the [housing market] demand growth,” said Lurie. “However, despite the improvement in new listings, market conditions remained tight generating relatively strong price gains.”
Also remaining tight is Calgary’s rental market. Canada Mortgage and Housing Corp. reported April rates in the city increased by five per cent over April 2013 and Calgary’s rental vacancy rate to be 1.4 per cent.
The tight rental market is resulting in more consumers considering buying homes of their own.
“Higher rents and lack of choice in the rental market, combined with favourable lending rates and a positive economic outlook has contributed to the rise in housing demand,” said Lurie.