Sales in Canada’s resale housing market are approaching pre-recession highs seen in 2007, while rising prices in Calgary continue to outpace the nation – prompting an economist to warn the country’s hottest markets may be susceptible to a “shock.”

The Canadian Real Estate Association reported Monday that sales in August were up 1.8 per cent month over month, due to strong sales in major centres. It was the seventh consecutive month of growth for the country’s housing market.

“Although activity rose in fewer than half of all local housing markets in August, the national tally was fuelled by monthly sales increases in Greater Vancouver, Calgary and Greater Toronto,” said CREA.

Sales rose the most in Vancouver, up 10.3 per cent, at 2,820 units. Calgary sales were up 5.2 per cent, at 2,976 units. CREA’s data for Calgary includes the city’s surrounding areas.

Doug Porter, chief economist with BMO Capital Markets, said the overall level of sales in Canada is closing in on the pre-recession highs reached in 2007.

He said markets are balanced in most regions, but Alberta is an exception, “where sellers retain the upper hand over the ongoing tide of newcomers to the province.”

“Canada’s housing market remains healthy and well balanced overall, albeit with sizeable disparities across regions. The major potential flashpoint is that prices in the three hottest cities — Calgary, Toronto and Vancouver — are rising faster than family income, further straining affordability,” he said. “The continued rapid price gains in these cities will increase their vulnerability to a shock — whether economic, interest rate, or something else.

“The persistent strength in these cities is no doubt what prompted the Bank of Canada to stop talking about the inevitably of a soft landing for Canadian housing, and to suggest that the sector has been stronger than they expected. But we would reinforce the message that talk about the hot housing market is really only a three-city story.”

The CREA reported Monday that Calgary’s annual price growth of 9.83 per cent in the MLS Home Price Index was much steeper than the national aggregate of 5.33 per cent.

Gregory Klump, CREA’s chief economist, said listings and sales this spring were deferred due to unseasonably harsh weather, which subsequently supported activity once the delayed spring homebuying season got into gear.

“This trend was reinforced by a decline in mortgage interest rates,” he said.

“The boost from deferred sales is still expected to prove transitory. While national activity has yet to cool, sales were down from the previous month in the majority of Canada’s local markets, which may be early evidence that the transitory boost is fading. That said, low interest rates will continue to support housing affordability and sales activity.”

The national average price for homes sold in August was $398,618, up 5.3 per cent from the same month last year while the average in Calgary rose by 5.2 per cent to $454,994.

In Alberta, the average price rose by 4.2 per cent to $397,701 as sales were 3.8 per cent higher to 6,354 transactions.

A report by TD Economics said the obvious risk with a housing boom is that it may be fueled by unsustainable increases in debt. Despite rising housing activity, mortgage credit growth remains modest. This is largely a function of households paying back principal more aggressively than in the past, as well as moderation in home equity withdrawals, it said.

“There is, however, clear cause for caution. While households have moderated their credit growth, household debt remains near record highs,” wrote Brian DePratto, economist with TD Economics. “The ratio of household debt to disposable income reached 163.6 per cent in the second quarter, near the peak of 164.1 per cent seen in (third quarter of 2013).

“To sum up the current state of the housing market and household finances, it would appear that the party is still going, but households are nearing their limit. Real risks exist that bear close monitoring. Interest rates remain low, and their lure may prove too strong for households, fuelling a further acceleration in household debt. At the same time, net worth has been buoyed by gains in house prices, and a dramatic slowing, or even decline, in prices would have a damaging effect on net worth.”

The report said the housing party is likely to wind down in an orderly fashion. Rates can’t remain low forever, and TD expects a gradual rise as we approach 2015, leading to a natural deceleration in the demand for housing.

In an updated forecast also released Monday, CREA said sales nationally will reach 475,000 units in 2014, representing an annual increase of 3.8 per cent. Sales are expected to dip by 0.4 per cent in 2015 to 473,100 units.

CREA is forecasting Alberta sales to jump by 7.7 per cent to 71,200 transactions and 1.0 per cent to 71,900 units.

The average sale price in Alberta is forecast to rise by 5.0 per cent this year to $400,200 and by another 1.9 per cent next year to $408,000 while nationally the price will increase 5.9 per cent this year to $405,000 and by 0.7 per cent in 2015 to $407,900.

A luxury residential development just outside Calgary’s city limits has launched new sales phases for the project to take advantage of the growing appetite by homebuyers for high-end property.

The Watermark at Bearspaw development recently launched the third phase of its single-family estate lots and will launch the fourth and final phase of its luxury villas on September 27.

“It’s definitely a very positive sign for the market. We definitely see growth continuing. There’s a lot of interest in the single-family lots,” said Ian Macdonald, director of sales and marketing for the projected located in Rocky View County, just off Twelve Mile Coulee Road.

“It’s tremendous to see how the market has taken to this type of product.”

The Watermark community launched in March 2011.

The first phase consisting of 108 single-family lots are 100 per cent sold. The second phase of 66 lots is just over 85 per cent sold and the third phase has just released 30 lots.

Currently, said Macdonald, there are about 60 occupied homes in the community and about 60 homes under construction.

The project also includes a total of 101 semi-detached luxury villas.

“They’re tiered in a way that they have spectacular panoramic views of the Rocky Mountains. They’re walkout bungalows ranging from 2,000 to 2,600 square feet between both levels,” said Macdonald. “We have sold out of our first phase, our second phase, we’re 85 per cent sold in our third phase and we are releasing our fourth and final phase on September 27.”

The first phase had 32 villas. The second phase 14. The third phase 27. The fourth phase 28.

The villas were released just over a year ago and 68 have sold. First occupancies are expected before the end of this year.

The development is bordered by two golf courses – Lynx Ridge and Bearspaw. The Tuscany LRT station is also nearby.

The 116 hectares of property will eventually include 469 single-family homes and 101 luxury villas.

Interest in the luxury new home development is mirroring what is happening in the city’s resale market as Calgary is on pace to set a record again this year for MLS sales of properties more than $1 million.

“Sales priced over a million have been representing a larger share of our market,” said Ann-Marie Lurie, chief economist with the Calgary Real Estate Board. “Year-to-date (until the end of August) 611 million-plus sales occurred within city limits, representing 3.3 per cent of total share of sales. On a year-to-date basis this represents a steady annual climb since 2009 when the share of sales dropped to 1.46 per cent. Most of the million-plus product is in the single-family market. In August, 90 per cent of the inventory was for the single-family product type.

“A growing economy, low lending rates, improving wages and rising prices supporting equity gains for existing home owners, has supported demand growth for this segment. With no significant changes expected throughout the remainder of the year, the million-dollar segment will continue to represent a larger share of all sales.”

Felicia Mutheardy, acting senior market analyst for the Prairie and Territories for Canada Mortgage and Housing Corp., said so far this year the number of absorptions for new homes priced at or over $1 million has increased 27 per cent to 353 units from 279 units in 2013.

“The higher pace of housing activity in Calgary has been attributed to a number of factors, including job creation and gains in income levels,” she said. “As well, some homeowners have been experiencing gains in equity, which has offered them an opportunity to sell their existing home and move into a larger home. This has increased absorptions across a number of price ranges, including luxury homes.”

Don Campbell, senior analyst with the Real Estate Investment Network, said that with average prices growing a rapid pace across the board, the number of houses being sold in the luxury price range is increasing as the benchmark number where luxury has been defined has not moved to keep up with the pace.

“The second impact is the positive consumer confidence that has been brought on by the city having the highest average family household income in Canada of $98,000 and an overall lower tax rate. This combo leads to higher take-home pays than anywhere else in the country – which is providing Calgary families with the income to support larger and more expensive home purchases.”

Stronger condo apartment starts are spurring Calgary total housing starts to a potential new record this year but some cooling is expected in 2015, says a new report by Altus Group.

The consulting firm’s housing forecast said total housing starts in the Calgary census metropolitan area are expected to reach 17,800 this year then drop to 15,900 in 2015.

The report said total housing starts in the Calgary region were 12,600 in 2013 and the annual average between 2003-2012 was 12,100.

The high was reached in 2006 with 17,046 starts.

“The new condominium apartment market in Calgary is hot,” said the report. “Starts in the first half of the year were four times the level of the first half in 2013.”

From January to June, there were 3,793 new condo starts in Calgary this year compared with 957 for the same period a year ago.

At the end of June, there were 6,458 new condos under construction, up from 4,117 a year ago. Completed but unabsorbed new condos at the end of June were only nine compared with 327 a year ago.

Sales from January to June this year were 2,225 units, up from 1,939 last year.

Several factors have contributed to the boost in new condo construction.

“Strong demand has led to accelerated new home price increases in Calgary and resale price increases remain above inflation,” said the report.

“Job growth is expected to remain strong this year and next.”

The report is forecasting employment growth of 27,100 this year and another 27,500 in 2015 following a hike of 21,900 in 2013.

The annual average between 2003-2012 was 17,800.

There were 3,000 condo apartment starts in 2013. This year, the report is forecasting that to soar to 6,700 and then dip to 5,100 in 2015.

A recent report by Canada Mortgage and Housing Corp. forecast housing starts in the Calgary region to increase by 24 per cent this year to 15,600 units then drop by 7.7 per cent in 2015 to 14,400 units.

 

Calgary’s hot resale housing market showed no signs of cooling off in August as sales and prices continued to climb with the condo market setting a monthly record.

According to the Calgary Real Estate Board, August was the 17th consecutive month of year-over-year gains in MLS sales and the 31st consecutive month of year-over-year annual price growth.

There were 2,267 sales in August, up 3.42 per cent from last year. The median price rose by 6.02 per cent to $423,000 and the average sale price increased by 5.27 per cent to $477,783. New listings were up by 13.6 per cent to 3,150 and active listings at the end of the month climbed by 17.91 per cent to 4,596.

The benchmark price, which CREB says is the cost of a typical home, was up 10.18 per cent to $459,800.

Total sales were the second highest ever for August behind only the 2,326 sales level set in August 2005.

Calgary sales this month were buoyed by strong activity in the condo market as single-famly home sales actually dropped from a year ago. The single-family market saw activity decline by 2.38 per cent to 1,477 sales but the median price rose by 6.47 per cent to $479,000 while the average price was up by 5.42 per cent to $545,238. The benchmark price rose by 10.24 per cent to $512,300.

“Sales activity has continued to improve but it’s due to the condo sector,” said Ann-Marie Lurie, CREB’s chief economist, adding that August MLS sales hit new highs for the month in the condo apartment and condo townhouse categories as well as for condos overall.

It was the second consecutive month that single-family sales have declined year-over-year.

“This is all coming down to the affordability of product. This has been a trend that we’ve continued to see happen. With less and less product being available in the single-family price range at that lower end (below $400,000) we’ve seen that pick up in demand in the condo side,” said Lurie, adding the decline in single-family sales is taking place in the lower end of that market while sales above that price point have risen.

Lurie said more than 76 per cent of new condo listings are priced below $400,000 and represent more than 68 per cent of the total inventory within city limits.

Sales for condo apartments were up by 13.85 per cent to 452 units as the median price rose by 10.58 per cent to $287,500 and the average price was up by 11.48 per cent to $332,006. The benchmark price increased by 10.2 per cent to $298,200.

In the condo townhouse sector, sales increased by 19.86 per cent to 338 units as the median price jumped by 9.86 per cent to $339,894 and the average price rose by 13.27 per cent to $377,958. The benchmark price of $328,300 was up by 9.98 per cent.

The market that includes towns outside the city also saw a spike in activity with sales up 12.3 per cent to 484. The median price grew by 5.34 per cent to $375,000 while the average price was up by 7.29 per cent to $391,595. The benchmark price rose by 7.9 per cent to $375,600.

“Sales activity is still strong relative to long-term averages,” said Lurie. “And prices are still improving. Listings are increasing. So with inventory rising as it pushes to more balanced levels, we’re seeing prices start to level off. This is what we would expect . . . But we’re still going to see strong year-over-year price gains.”