Calgary’s new housing market is reaching unprecedented levels of over-building, a new report reveals.
Canada Mortgage and Housing Corp. recently released its Housing Market Assessment for the third quarter of 2020, finding the city’s new homes market showed a moderate degree of vulnerability to over-building.
“For Calgary what this means is completions and inventories of unsold new homes compared with the population is reaching a historic high,” says Michael Mak, senior analyst with CMHC.
The all-time in the last 30 years was in 2001 at 16 units per 10,000, he adds.
For the second quarter of 2020 — the latest data available — the figure was 15.4 units per 10,000.
By comparison, the metric was 3.25 in late 2014 before the fall in oil prices that negatively affected employment and led to a decline in the city’s real estate market since.
The recent assessment is based on data from April to the end of June, which saw the full impact of COVID-19 on the market.
Mak adds the market started its rebound from April’s bottom — when oil prices also flatlined — and does not reveal the full effect of the housing recovery, which continued through the summer.
He further notes over-building has been a problem in the Calgary market for a few years.
“From 2015 onward, there really hasn’t been a strong decrease in housing starts.”
But the type of homes contributing to oversupply has changed. In 2015, single-family detached homes were the largest share of inventory.
“This shifted as more condos came onto the market in 2016,” Mak says.
The change points to multi-family developments often lagging behind market conditions with new projects — conceived when demand was high — coming to market after demand had fallen off significantly.
“In contrast, single-detached homes are much easier to plan and build, and developers can react to the market more quickly,” he adds.
Still, unabsorbed supply of new single-family detached homes had increased during the second quarter, up nine per cent compared with the same quarter last year. By comparison unabsorbed semi-detached and row units were lower than the same period last year, 738 units compared with 801. Together these segments account for about six out of 10 unabsorbed units with condominiums accounting for the remainder of inventory.
But Mak notes, during the summer, single-family absorption increased while multi-family also showed strength because of its lower price point.