The average price for a resale home in Calgary will balloon to more than half a million dollars by 2017, according to a new real estate report released Tuesday.
The Conference Board of Canada’s Autumn Metropolitan Housing Outlook, commissioned by Genworth Canada, said the average price for all residential property in Calgary will grow from $431,760 this year to $517,016 in 2017.
“Calgary is facing a lack of inventory in particular areas,” said Tanya Eklund, a realtor with RE/MAX Real Estate (Central) in Calgary.
“Buyers looking for land for redevelopment and homes for renovation have been in very short supply and have driven up pricing due to multiple offers and low inventory. Low interest rates, strong unemployment rates, low vacancy rates and an overall strong economy have also added to strength in the Calgary market.”
Ben Brunnen, an economic consultant in Calgary, said the city’s population has grown each year for the past four years and this has helped drive residential construction activity and home prices.
“Net-migration can have a big impact on the housing market, as an influx of people and families into our city can often increase housing demand unpredictably,” he said.
“In the current market, vacancy rates are low, rents are high and population growth is strong. Combined with a good economy and favourable job prospects, people are more willing to buy than they were a few years ago. The last time we’ve seen comparable population growth was from 2004 to 2006, when the economy entered a boom. While we won’t see similar house price appreciations due to different global economics at play, Calgary house prices should stay strong for the near future.”
Calgary’s economy and housing demand continue to thrive as energy sector activity remains healthy. Rising GDP is spurring employment growth,” said the report.
“On the resale housing market front, solid sales will lead to sound price gains this year and next. The new housing market is benefitting from strong absorptions, which are trimming unsold stocks of new units and fostering new construction. The medium term also looks decent.
“Ongoing economic growth will continue to produce gains in resale sales and prices and keep housing starts above their 20-year average. Good housing affordability, measured against local incomes, is an ongoing benefit to this market and allows single-family starts to maintain a high market share compared with other cities covered in this report.”
The report said summertime flooding in Calgary will limit Calgary’s GDP to 3.3 per cent growth in 2013, modest by recent standards. Output will rise a slightly faster 3.4 per cent in 2014, spurred by government-funded rebuilding efforts.
The job market will continue to expand, with annual growth of 2.4 per cent this year and 2.8 per cent in 2014 cutting the unemployment rate from 4.9 per cent this year to 4.6 per cent in 2014. Economic health should continue between 2015 and 2017, with GDP expanding roughly three per cent and employment rising about two per cent each year, it said.
“Calgary’s strong economic fundamentals allowed its resale market to largely shrug off the floods. Seasonally-adjusted sales and the average resale price actually rose during June, the flood month, and have subsequently advanced,” said the report.
“Price growth is accelerating, although increases remain far below boom-era advances. We expect the market to remain balanced and price growth to stay healthy in 2014 and over the following few years.”
The report’s forecast for average prices over the next few years and annual growth rate are: 2013, $431,760, 4.7 per cent; 2014, $451,798, 4.6 per cent; 2015, $473,470, 4.8 per cent; 2016, $497,139, 5.0 per cent; and 2017, $517,016, 4.0 per cent.
Forecast for sales in the resale market for the next few years and annual growth rate are: 2013, 28,111, 5.5 per cent; 2014, 28,793, 2.4 per cent; 2015, 29,418, 2.2 per cent; 2016, 30,027, 2.1 per cent; and 2017, 30,620, 2.0 per cent.
“Unsurprisingly, Calgary’s resale prices are rising briskly. Year-over-year growth has averaged a solid 4.6 per cent in the latest four quarters, including a first quarter jump near eight per cent,” said the report. “These increases will lift Calgary’s average price 4.7 per cent in 2013, the largest gain since 2007 and finally exceeding that year’s peak value. Similar price growth is expected between 2014 and 2016, with a slight tapering in growth to four per cent in 2017.
“These increases will slightly erode local housing affordability. Principle and interest charges on Calgary’s average resale home were under 16 per cent of average household income the last two years and are expected to remain there in 2013. But house prices will rise faster than incomes, pushing the ratio to roughly 20 per cent by 2017. This remains decent, as affordability is better only in Edmonton, Ottawa, and Winnipeg among the cities in this report.”
The report said buoyant housing demand is also energizing the new home market. Absorption of new units averaged 11,200 units in the four quarters to the second quarter of 2013, up 25 per cent from a year earlier. This included a surge to an annualized 15,000 units in the second quarter, the most since 2008. This strength will lift absorptions to a full-year total of 12,140 units in 2013, up 25 per cent from 2012. Another increase of nearly six per cent in absorptions is expected for 2014, but still trailing the peak of 13,700 units reached in 2008.
“Healthy new-unit take-up fuelled a big jump in housing starts to 13,186 units in 2012, more than double the recessionary trough in 2009, but well off peak levels of the last decade,” it said. “We expect starts to ease a modest 2.7 per cent in 2013 as an 11 per cent dip in multiple starts slightly outweighs a seven per cent gain in single-detached starts. For 2014, rebounding multiple starts will fuel a five per cent increase in total starts despite relatively unchanged single-detached construction.
“In the medium term, we expect housing starts to ease slightly, as both single-family and multiple construction dip. By 2017, we expect 11,400 units to get under way; this would slightly outpace the 20-year average of housing starts. While multiple starts are expected to increase their market share, they are forecast to make up only 52 per cent of total starts between 2013 and 2017.”
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