Apartment-style condo supply tightened in 2018

If you’re in the market for a new home, it should come as no surprise year-end data from Canada’s leading provider of mortgage insurance found Calgary’s market offers plenty of choice.

Yet what might come as a shock from 2018’s final inventory numbers from Canada Mortgage and Housing Corp. is unexpected strength in a part of the market that has been beat up the most coming out the recent recession.

“Overall Calgary is still struggling with over-building in the market right now,” says James Cuddy, senior analyst with CMHC.

“But the one segment of the market where inventories have come down is new condo apartments.”

To get a sense of how it compares with other segments, here’s how the final inventory figures for 2018 played out:

-At the end of 2018, 915 completed and unabsorbed condominium apartment units remained on the market, down from 1,208 units at the end of 2017. That’s a 24 per cent decrease, he says.

-By comparison, inventory for single-family detached homes increased year over year from 453 to 542 units, a 20 per cent rise.

– Row housing inventory rose to 288 at the end of 2018 from 187 in 2017. All told, levels in this segment increased 54 per cent.

-For semi-detached, the numbers at the end of 2017 were 182, rising to 360 at the end of last year — a 98 per cent uptick.

Cuddy says he is cautious about interpreting the drop in condominium apartment supply as a sign the market may be turning around.

The overall inventory for the segment is still by far the most elevated among housing options. Still, he notes support in the segment is likely sustainable going forward, “given the trend in construction and the growing preference for affordable options.”

He points to rising interest rates and tighter lending rules as two key reasons the apartment segment is seeing more demand, along with falling inventory levels.

“There’s definitely a shift in the type of condos individuals are demanding,” he says. “Buyers want more affordable units.”

One indicator of this emerging trend is resale data showing condominium sales overall for the city fell in 2018, but for units priced at $200,000 or less, sales actually grew by 19 per cent, he adds.

“At the same time, the industry has also responded to the market conditions — something that took time to occur.”

At the start of the recession industry lagged behind the economic conditions on the ground, which quickly evolved in late 2014 as energy prices fell and continued to do so in 2015.

“It was really a case of bad timing with a lot of development underway just when the recession hit,” Cuddy says.

“Now we’re still dealing with that issue of high inventory as a result.”

Since then, developers have adjusted with fewer new projects under development, and those that are in the works are more likely to focus on the lower priced segment of the market where demand is stronger.

The past year’s numbers likely mean conditions should remain challenging for developers as well as individuals selling their homes in the year ahead.

But the one “silver lining” in the data is that buyers will continue to benefit, Cuddy notes.

“It’s certainly buyers’ market conditions and, given that there are a lot of options, buyers have more bargaining power when it comes time to close the deal.”

from Calgary Herald http://bit.ly/2MSaFuH

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