Alberta’s hot housing market expected to cool

THINK OUTSIDE THE BOX:  Although demand for resale homes in Edmonton and Calgary will continue to remain robust, as employment and migration gains slow and interest rates rise, sales in the resale market will start to cool too.
The frenzied housing environment in both Edmonton and Calgary is expected to moderate over the next two years according to the Canada Mortgage and Housing Corporation’s (CMHC) most recent Fall Housing Market Outlook. After two years of significant gains in the new housing market, total housing starts in both cities are projected to soften through 2015 and 2016 as both employment growth and in-migration levels relax.

In Calgary, the CMHC reports that total housing starts will reach record highs (17,200 units) by the end of this year. Multi-family starts (apartments, condos, etc.) are expected to reach their highest total since 1978 and will help lift housing starts to their record highs. Total housing starts for Calgary in 2015 are forecasted to reach 14,400 and 12,800 in 2016.

Levels will moderate in Edmonton as well. Total housing starts are projected to reach 13,300 units in 2014 and then drop to 13,000 in 2015 and 12,300 in 2016. By the end of this year, the price of a new single-detached house in Edmonton is forecasted at $553,000 and $620,000 in Calgary.

The CMHC acknowledges that Alberta’s hot job market, rising wages, significant in-migration numbers and affordable mortgage rates have propelled the existing home market in Alberta’s two major cities. Demand for resale homes in Edmonton and Calgary will continue to remain robust. However, as employment and migration gains slow and interest rates rise, sales in the resale market will start to cool too. By the end of 2014, the CMHC predicts the average resale price in Edmonton to be $360,000 and $459,000 in Calgary.

Nick Ford – Economist     November 5, 2014

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