Calgary’s housing market showing signs of improvement

The tide could be turning in Calgary’s housing market. That’s one key takeaway from a recent report from Canada Mortgage and Housing Corp.

The federal agency published its quarterly Housing Market Assessment for the first quarter of 2019. And while the overall assessment for the Calgary market points to moderate vulnerability, it also shows the key metric dragging on the market — over-building — looks to be subsiding.

“Over-building has started to come back a bit,” says James Cuddy, senior market analyst with CMHC.

The last national report assessing 15 metropolitan areas released in the fall of last year showed over-building in the city remained a significant factor, negatively affecting the market. This time around, the over-building risk is considered moderate.

“There are two critical indicators to look at here which are driving this,” Cuddy says. “One is inventories in the condo market, which remain elevated.”

In fact, inventory overall in the region per capita was higher at the end of last year than at any point since the early 2000s. This condition, of course, is a prime reason the market is slumping from a price perspective — too much supply.

On the positive side, however, vacancy for rentals fell from 6.3 per cent in October 2017 to 3.9 per cent in the same month in 2018.

“Last year was the first year we saw positive price increases in terms of rental rates” since 2014, Cuddy notes.

This bodes well for the housing market.

“Ultimately in Calgary, it will get to a point where renters are making that trade-off decision between the cost to rent and the cost to buy,” Cuddy says.

“And prices are coming down in the housing market while rents are rising, so eventually the trade-off will shift.”
Still, for that to happen, a number of other factors remain critically important.

“A lot of it depends on what’s going on in the economy,” he says. “Whether individuals want to buy or rent, it comes down to their personal finances meeting the requirements and eligibility rules for (a mortgage) before moving into home ownership.”

High unemployment and lacklustre wage growth are the biggest headwinds to the market regaining strength.

Yet the latest data show other potential issues — price acceleration, overheating and overvaluation — are not concerns in the Calgary market. By contrast, these remain major problems in Toronto and Vancouver, which are significant enough to keep the overall assessment for the Canadian market as vulnerable, the report found.

But in most other major cities, Calgary included, these are not challenges. Still Calgary is unique — except perhaps in Edmonton, only less so — in that economic woes still weigh heavily, Cuddy says.

Simply put, for the market to turn positive — at least from a pricing standpoint of sellers — the city’s economic fortunes must change, Cuddy says.

“As long as unemployment remains relatively high and there’s still a lack of growth in real personal disposable income, individuals will still feel financial pressures, preventing them from moving into home ownership.”

from Calgary Herald

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