Report forecasts increased starts, sales and prices
Job gains, population growth, and low interest rates will support condominium demand in Calgary, says a national report released Thursday.And the city is the most affordable among the top eight large metropolitan areas when analyzed relative to local incomes.“A balanced resale market is expected this year, with moderate sales increases and resumed price growth. Falling unsold builder stocks will help lift starts in 2012, before they drop in 2013,” said the Metropolitan Condo Outlook by Genworth Canada in conjunction with the Conference Board of Canada.“The market for new condominium apartments is regaining its footing in Calgary. Although new unit absorptions fell sharply in 2011, this mainly reflected sagging completions, themselves the product of weak starts following the 2009 recession. More importantly, unsold builder inventories have generally eased. Although these ticked up in the first quarter of this year, such a wintertime increase is common in Calgary and followed significant declines in two of the previous three-quarters.
“More broadly, inventories remain below year-earlier levels and are expected to keep easing through most of the next two years. This reflects both a recovering Calgary economy and pent-up demand.”
The report said it expects condo starts to hit a four-year high of 2,373 units in 2012, up 15.5 per cent from the previous year but to drop by 11.7 per cent in 2013 to 2,099 units.
The report, which looked at eight large Canadian metropolitan areas, said resale condo transactions in Calgary would jump by 3.8 per cent this year to 3,555 and another 1.9 per cent in 2013 to 3,621.
Calgary’s resale condo price is forecast to increase by 0.9 per cent this year to $239,445 and by another 2.9 per cent in 2013 to $246,414.
“Relatively high local incomes, combined with middle-of-the-pack condominium prices, give Calgary the best affordability among the eight cities covered in this report,” it said. “Principle and interest charges are expected to consume only 8.9 per cent of local incomes during 2012, down from 9.2 per cent in 2011 and a peak of 12.7 per cent in 2007.
“Affordability is expected to remain good in 2013 as interest rates stay moderate and the median price rises at roughly the same pace as the expected increase in household income.”
Richard Cho, senior market analyst in Calgary for Canada Mortgage and Housing Corp., said demand for condominium units has been stronger this year compared with 2011.
“Along with rising employment, higher migration and favourable mortgage rates, modest price growth and the decline in the rental vacancy rate have also contributed to the increase in condo sales,” he said.
“Condo sales are up from the previous year while there have been fewer new listings. This has helped active listings decline from 2011 levels. In addition, inventory of new condominium units has also moved lower from a year earlier. As such, we have seen more pressure on prices.”
The local resale market is stabilizing after a shortage of listings in early 2011 prompted an abrupt tightening, said the report.
“More broadly, inventories remain below year-earlier levels and are expected to keep easing through most of the next two years. This reflects both a recovering Calgary economy and pent-up demand.”
The report said it expects condo starts to hit a four-year high of 2,373 units in 2012, up 15.5 per cent from the previous year but to drop by 11.7 per cent in 2013 to 2,099 units.
The report, which looked at eight large Canadian metropolitan areas, said resale condo transactions in Calgary would jump by 3.8 per cent this year to 3,555 and another 1.9 per cent in 2013 to 3,621.
Calgary’s resale condo price is forecast to increase by 0.9 per cent this year to $239,445 and by another 2.9 per cent in 2013 to $246,414.
“Relatively high local incomes, combined with middle-of-the-pack condominium prices, give Calgary the best affordability among the eight cities covered in this report,” it said. “Principle and interest charges are expected to consume only 8.9 per cent of local incomes during 2012, down from 9.2 per cent in 2011 and a peak of 12.7 per cent in 2007.
“Affordability is expected to remain good in 2013 as interest rates stay moderate and the median price rises at roughly the same pace as the expected increase in household income.”
Richard Cho, senior market analyst in Calgary for Canada Mortgage and Housing Corp., said demand for condominium units has been stronger this year compared with 2011.
“Along with rising employment, higher migration and favourable mortgage rates, modest price growth and the decline in the rental vacancy rate have also contributed to the increase in condo sales,” he said.
“Condo sales are up from the previous year while there have been fewer new listings. This has helped active listings decline from 2011 levels. In addition, inventory of new condominium units has also moved lower from a year earlier. As such, we have seen more pressure on prices.”
The local resale market is stabilizing after a shortage of listings in early 2011 prompted an abrupt tightening, said the report.
“Although supply rose throughout the year, average listings over the full year were the fewest since 2006. Combined with a slight increase in sales during 2011, this lifted the full-year sales-to-active-listings ratio to 31 per cent, the highest since 2007. But the ongoing supply hikes, combined with generally steady sales, cut the ratio to 23 per cent by the fourth quarter and, further, to 21 per cent by the first quarter of 2012,” it said.
“High sales-to-new-listings ratios during the boom period prior to the recession make it difficult to determine what constitutes a balanced market here. But it seems likely that a sales-to-listings ratio hovering just above 20 per cent is at the low end of this range.”
“High sales-to-new-listings ratios during the boom period prior to the recession make it difficult to determine what constitutes a balanced market here. But it seems likely that a sales-to-listings ratio hovering just above 20 per cent is at the low end of this range.”
By Mario Toneguzzi, Calgary Herald August 30, 2012
Read more: http://www.calgaryherald.com/business/Calgary+condo+market+upswing/7166884/story.html#ixzz258c57m8s
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