Jan 10, 2012, Housing Start Expected to Increase in 2012 and 2013 in Alberta

Alberta to buck national trend for new home construction
Housing starts expected to increase in 2012 and 2013

By Mario Toneguzzi, Calgary Herald January 10, 2012 10:06 AM

CALGARY — Alberta is expected to buck the national trend for new home construction in the next two years, according to a report by TD Economics.

After seeing a forecasted 6.3 per cent annual decline in 2011 to 25,200 housing starts, the report is predicting new home construction will increase in the province by 2.5 per cent in 2012 to 25,800 units and by another 1.6 per cent in 2013 to 26,200 units.

At the national level, housing starts are expected to decline by 5.6 per cent in 2012 to 181,300 and by 5.3 per cent in 2013 to 171,700.

Tim Logel, president and partner of Cardel Lifestyles in Calgary, said there was a pent-up demand of buyers in the local market at the end of the year and more buyers are now coming forward.

A healthy economy, low interest rates, strong employment growth and increased in-migration are fundamentals pointing to an improved housing market.

Logel said Cardel had 218 building permts for condos and townhomes in 2011, up from 172 the previous year.

Multi-family permits over the past five years have reached 850 for the local builder, tops in the city.

“I’m expecting the same type of growth for our company that we had year-over-year,” noted Logel of the next couple of years in the homebuilding industry.

According to data released Tuesday by Canada Mortgage and Housing Corp., total housing starts in the Calgary census metropolitan area were up 0.3 per cent in 2011 to 9,292 units. That included a 20.9 per cent hike in multi-family starts of 4,208 but a drop of 12.1 per cent in the single-detached market to 5,084 units.

For 2011 as a whole, builders in Alberta started 23,300 housing units, down from 24,100 in 2010. By comparison, Alberta recorded a total of 40,900 urban dwelling starts in 2006 and starts never fell below 32,000 units per year between 2002 and 2007, said Dan Sumner, economist with ATB Financial in Calgary.

“One reason starts have been slower to bounce back than other indicators is that it has taken a long time to get through the inventory of homes that were left when downturn of 2008 hit,” he said. “As that excess inventory gets steadily eaten away, starts should gain some traction. Other reasons include lower net migration to Alberta and a lower household formation rate.

“This year should definitely see housing starts push higher from last year, although a return to peak levels isn’t anywhere on the radar screen.”

Canadian housing starts climbed to 200,200 annualized units in December, up from 185,600 units in the previous month, said Diana Petramala, economist with TD Economics.

“Looking forward, despite a continued low interest rate environment, a weak labour market, in combination with overall softening economic conditions, will likely put a damper on overall housing demand and building in 2012,” she said.

“As such, housing starts are expected to cool into a more sustainable range of 175,000-185,000 annualized units per month in the new year.”

In the existing home sales market, the TD Economics report forecasts sales to increase by 0.5 per cent in Alberta in 2012 to 53,300 transactions and then dip by 2.7 per cent in 2013 to 51,900.

This after a 6.6 per cent hike in sales in 2011 to 53,000 transactions.

TD Economics forecasts the average existing home price to remain unchanged in Alberta in 2012 at $355,900 after increasing by 1.1 per cent in 2011 to $356,100. But the average is expected to fall by 2.5 per cent in 2013 to $347,200.

At the national level, TD Economics expects existing home sales to drop by 2.4 per cent in 2012 to 445,000 units and fall another 3.5 per cent in 2013 to 429,200. This after a 2.2 per cent increase in 2011 to 456,200 units.

Across Canada, the report said the average existing home price would fall by 1.9 per cent in 2012 to $357,100 and decline by 3.6 per cent in 2013 to $344,200. In 2011, it rose by 7.5 per cent to $364,100.

mtoneguzzi@calgaryherald.com

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