Record growth is not in the foreseeable future of the Canadian condo market, but it is also likely the sector will be able to avoid a major downturn, according to the latest Conference Board of Canada condo report released Wednesday by Genworth Canada.
The Summer 2013 Metropolitan Condo Outlook suggests population growth and employment gains will help maintain demand levels to absorb supply inventory.
Calgary starts will be hampered in the third quarter by the flooding earlier in the year, but as the “youngest” city in the survey, it is expected to enjoy the highest growth in starts and resale volumes in 2014, with price growth at a moderate level of two per cent to 3.5 per cent over the next few years, said the report.
The report forecast the median price for a resale condo apartment in Calgary will rise this year by 2.8 per cent, the highest in Canada, to $251,237 and by another 3.3 per cent in 2014 to $259,640.
However, it is forecasting sales to drop by 11.6 per cent to 3,508 units this year but rebound by 10.2 per cent in 2014 to 3,867 sales.
“Whether it’s first-time homebuyers entering home ownership, empty nesters looking to downsize or professionals seeking a shorter commute, condos appear to remain a popular option for urban Canadians,” said Brian Hurley, chairman and chief executive of Genworth Canada.
The report said economic factors affecting the housing market, such as employment, interest rates and population growth, will only undergo moderate changes. Employment is expected to rise modestly in the medium-term and interest rates are expected to increase gradually, while population expansion and demographics will continue to support demand in regional markets.
“As condo starts near past averages and inventories edge closer to demand, we are seeing the condo market stabilize both in terms of the price of existing units and the volume of new construction,” said Robin Wiebe, senior economist at the Centre for Municipal Studies at the Conference Board of Canada. “Softer prices and positive economic factors continue to make condos an affordable way for Canadians to achieve home ownership.”
The report said condo sales in Calgary had been doing well before the flood, averaging over 3,900 units at an annual rate in the fourth quarter of 2012 and the first quarter of 2013.
“Active apartment listings had tapered off, hovering below 1,000 units in the fourth quarter of last year and the first quarter of 2013,” said the report. Still, for 2012 as a whole, active listings averaged 1,263 units, up 30 per cent from 2011. The flood has presumably damaged at least some actual or potential apartment listings. This will cut active listings in the third quarter by 10 per cent and lead to a 26 per cent decline in listings for all of 2013.
“The lower listings last autumn lifted the sales-to-active-listings ratio slightly above 35 per cent, its highest level since 2009 and likely approaching sellers’ market conditions. The ratio is forecast to stabilize near 34 per cent in the third quarter of 2013 and end the year at 31 per cent. A solidly balanced market featuring a sales-to-active-listings ratio between 33 and 35 per cent is our call for between 2014 and 2017.”
According to the Calgary Real Estate Board, year-to-date until August 27, there have been 2,767 MLS condo apartment sales in the city, up 14.20 per cent from a year ago. The median price has risen by 3.60 per cent to $259,000 while the average sale price has increased by 7.01 per cent to $297,954.
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