Construction declines won’t diminish market, says industry
Calgary’s new housing market in 2016 will be characterized by a gradual slowdown, with highlights coming from first-time buyers, a resurgent luxury sector and continued multi-family growth, say industry insiders.
Canada Mortgage and Housing Corp. (CMHC) forecasts a 16 per cent decline in Calgary housing starts to 10,000 units, following a 23.9 per cent decline Calgary in 2015.
For single-family homes, that means only 4,000 starts this year — the lowest since 1988 – from 4,138 in 2015.
Multi-family starts are predicted to fall to 6,000 units from 8,895 last year.
Despite the slowdown, Canadian Home Builder’s Association-Calgary president Wendy Jabusch believes Calgary’s housing market will continue to remain healthy, especially as net-migration numbers to the city continue to be positive. The Conference Board of Canada forecasts levels will total 11,747 in 2016, compared with 14,951 in 2015.
Many of these buyers will be price sensitive and more inclined to look at smaller suburban lots, townhomes or urban multi-family units, noted Jabusch.
Yet in CREB®’s 2016 Economic Outlook & Regional Housing Forecast, chief economist Ann-Marie Lurie expects new completions from the new home sector, when combined with “more resale supply coming from people who can no longer wait to sell their homes,” will contribute to annual benchmark price declines.
While all sectors of the resale market will be affected, the apartment and attached sectors are expected to be the hardest hit due to already elevated inventory levels.
Brookfield Residential vice-president of Calgary homes Ian Nash, whose company builds single- and multi-family projects and is the province’s largest land developer, said 2015 was actually the company’s best year ever for sales and closings in Alberta.
He sees 2016 being a strong market for both the under-$500,000 and first-time buyer segments (which makes up 60 per cent of Brookfield’s purchasers).
“There are a lot of sectors (other than oil and gas) still doing well, including the public sector — teachers, firemen, police and health care — that have secure jobs,” he said.
Brookfield plans to launch a new multi-family project in Auburn Bay, a project in Airdrie’s Fireside and a couple of inner-city row home projects in 2016.
It also hopes to bring its new master-planned development Livingston in Calgary’s north on stream by the end of the year, while continuing the approval process for South Seton, South Bearspaw and a new project in Airdrie.
Charron Ungar, president of Avi Urban and a former CHBA-Calgary president, said while show home traffic has decreased for his 15-year-old company (building multi-family projects in both inner city and suburban Calgary), the buyers he’s seeing are getting straight to the point.
“They are the serious buyers who recognize the bottom of the cycle,” he said. “There is product availability, low interest rates and incentives.”
However, he said because build time for multi-family projects is twice as long as for single-family units, inventory is lower with current construction based on previous year’s purchases.
While CREB® is reporting an oversupply in both the resale apartment and attached sectors, Ungar believes the new home market has an under-supply of low-rise condos and townhomes.
“I think there is opportunity to provide that product and be successful,” he said.
Meanwhile, some believe Calgary’s once-booming luxury home market is poised for recovery in 2016 after being one of the hardest hit by the economic slump.
Ian Macdonald, director of sales and marketing of Watermark at Bearspaw (named top community in Canada twice) said his luxury home development (all homes are between $1.2 million and $3.5 million) has seen continued interest, albeit from a different buyer profile.
Last year, Watermark saw purchasers from Denver, Ontario and Houston who moved into the city. Macdonald expects additional purchasers will include those who have sold homes and now need a quick possession — something his development will focus on, as opposed to new custom builds.
Macdonald also expects to see continued diversity in Watermark buyers.
“Previously, they were from oil and gas,” he said. “Now, we are seeing those in the health industry, law and finance. The health-care industry is dominating, particularly because of our close proximity to Foothills hospital.”
In 2015, 13 homes and 10 lots were sold in Watermark. Macdonald said four homes started construction in the development this month.
He expects Watermark will also bring more lots to market this year in a development that will see 469 homes at completion.
“We’ve all gone through this (economic downturn) before and we will come out stronger.”