Modest Growth for Calgary Real Estate in the 2013
Calgary Housing - NEW HOME
New home starts surged in 2012, driven by low mortgage rates, strong employment and migration growth and declining supplies in the resale market.14 Housing starts are estimated to total 12,400 units in 2012, a 33 per cent rise over lacklustre 2011 figures. Starts activity was relatively weak throughout 2009-2011, and the renewed level of growth will bring starts in line with household formation estimates.
This year, the forecast 11,900 housing starts represent a decline of 4 percent compared to 2012. The decline is anticipated as multi-family builders reduce production levels in response to a higher number of units under construction, potentially driving up inventory. 14 This is also in-line with indicators suggesting a slight pullback in employment and migration growth.
Calgary Housing - RESALE MARKET
The resale market finally gained some momentum in 2012 as sales activity rose both within city limits and in surrounding areas. Sales within city limits totaled 21,207, an 15 per cent increase over 2011. While sales growth was slightly stronger than expected, the total represented a recovery to more typical levels of activity. This trend reflected the strong economic activity in the area which generated significant growth in full-time employment and attracted a near record number of migrants to the area. Meanwhile, the level of new listings declined by 6.5 per cent, causing average inventory levels – which have been elevated – to decline by 18 percent in 2012 from 2011.
The decline in inventory levels put upward pressure on prices. City-wide benchmark prices recorded significant gains in the spring, but leveled off in the last two quarters. Overall, the benchmark price in Calgary averaged $381,408 in 2012, a 5per cent rise over average figures in 2011. By comparison, the annual median and average prices rose by 4 per cent and 3 per cent respectively.
Although the price increase seems significant, it is important to note that prices in 2011 were falling compared to 2010. Prices in Calgary are recovering, but failed to reach the highs recorded in 2007.
This year, the level of sales growth is expected to ease to 2.2 per cent, for a citywide total of 21,669 units. Slower employment and migration growth, combined with stricter mortgage lending criteria, are expected to ease sales growth. Another factor that will affect sales growth is a slight decline in the number of new listings.
New home starts are expected to remain near 12,000 units, levels that are in line with growth expections, indicating it is unlikely that standing inventories in the resale market will rise. Easing sales growth combined with no significant increases in inventories will keep the resale market in balanced territory. Balanced conditions, rising wages and no further changes expected in mortgage lending rules or rates will support price growth of 2.9 percent this year.
Calgary Housing - SINGLE FAMILY HOMES
In 2012, the single family market recorded sales growth of nearly 15 per cent, the strongest level of activity since the recession. From 2002 to 2007, sales in the single family market averaged 17,000 units annually. The market has not yet regained that pace, and is not likely to do so this year. The level of new single family new listings continues to decline, limiting potential sales growth for that segment within city limits. There are fewer listings because those who purchased during the peak period have not seen prices fully recover, and, without equity gains, are less likely to list their homes. The composition of housing is shifting, with more new home starts geared towards multi-family development. With no significant changes expected in new listings and with City of Calgary housing policies focused on encouraging multi-family development, single family sales are expected to record only modest growth of 1.8 per cent.
The growth in sales activity in 2012 outpaced new listings, and that depleted average inventory levels by nearly 20 per cent. This placed upward pressure on single family pricing. Benchmark prices averaged $424,708 in the year, a 6.7 percent increase over the previous year. Despite the rise, the city remained 2.4 per cent lower than average levels recorded in 2007. This year, it is expected that the level of supply relative to sales activity will remain in the lower end of balanced territory – i.e. modest, but adequate, supply. This, combined with rising wages and low interest rates, will encourage price growth. However, continued economic uncertainties, as well as slower employment and migration growth in the city are expected to prevent any significant runup in pricing. Single family prices are estimated to rise by 3 per cent, for an annual benchmark average of $437,449.