Slower-than-expected building activity has prompted Canada Mortgage and Housing Corp. to scale back its 2011 projections for Red Deer’s housing market.
In CMHC’s latest market outlook, issued on Wednesday, the Crown corporation said it now expects home construction starts in the city to number 505 this year. That figure consists of 330 single-detached structures and 175 units in multi-family projects, and would represent a nearly 13.7 per cent slide from the 2010 tally of 585 starts.
The Crown corporation has lowered its expectations for residential construction in Red Deer in every quarterly forecast it’s issued since last fall.
CMHC is anticipating that housing starts will drop by 40.1 per cent in Medicine Hat this year, by 15.8 per cent in Calgary and by 10.1 per cent in Edmonton. Increases are expected in the Regional Municipality of Wood Buffalo (17 per cent), Grande Prairie (13.5 per cent) and Lethbridge (2.5 per cent).
Single-detached housing starts in Alberta should improve over the balance of 2011, said CMHC, but will still end the year down about 10 per cent. But higher employment and wages should push construction to higher levels in 2012, it added.
In the case of multi-family homes, a high inventory of properties in the province has discouraged new construction, said CMHC. Multi-family starts in 2011 are expected to slide eight per cent this year, but rebound on improved demand next year.
CMHC is forecasting that Red Deer will see 575 residential construction starts in 2012, which would be a 13.9 per cent improvement over 2011.
As for the local resale market, CMHC is now forecasting a nine per cent jump in Multiple Listing Service sales in Central Alberta in 2011, to 3,400. However, the average selling price is expected to be 1.2 per cent lower, at $266,000.
Elsewhere in the province, 2011 MLS sales are expected to increase by 12.4 per cent in the Regional Municipality of Wood Buffalo, 7.6 per cent in Grande Prairie, 4.8 per cent in Calgary, 1.4 per cent in Lethbridge and 0.6 per cent in Edmonton. Sales in Medicine Hat are expected to drop by 6.4 per cent this year.
Central Alberta is the resale market projected to have a lower average selling price in 2011, with the average in Alberta’s other major centres forecast to increase by between zero and 5.2 per cent.
CMHC said economic growth and improving migration patterns are supporting Alberta’s resale market, with sales provincewide expected to rise by three per cent this year. Higher carrying costs are expected to hurt sales in 2012, but an in-migration of people should still push sales higher.
For Central Alberta, CMHC is forecasting that sales in 2012 will rise by 2.9 per cent, to 3,500. Meanwhile, the average price is expected to improve to $270,000, a change of 1.5 per cent.
Canada-wide, CMHC is anticipating a slight increase in the number of new homes to be built this year.
Despite the recent financial uncertainty, CMHC thinks factors like employment, immigration and mortgage rates will support demand for housing, said Mathieu Laberge, the housing agency’s deputy chief economist.
Housing starts have been strong in the past few months, but will likely moderate closer in line with demographic fundamentals — or the rate of new household formation — Laberge said.
Ontario and Saskatchewan are expected to see the most new home growth this year, while British Columbia and Alberta will see the biggest gains in 2012.
The new home market tends to follow trends in the resale market — with about a six-month lag — and the strong demand will help prop up the home building industry.
The CMHC predictions come a week after the Canadian Real Estate Association revised its forecast for national home resales up for the rest of the year, citing stronger than expected sales and higher prices in the second quarter.
CREA said sales should grow less than one per cent this year, up from an earlier forecast that called for a one per cent dip in sales. Housing demand has been more robust than expected as interest rates remain low, enticing more buyers to take on mortgages at historically low carrying costs.
CMHC’s prediction for sales of resale homes in Canada was slightly lower. But in 2012, it believes sales will rise.
CMHC expects the price of an average resale home in Canada to rise by 8.4 per cent this year and by 1.3 per cent in 2012. But as the existing home market moves into a more balanced territory, as the number of new listings increases, growth in the average home price on CREA’s multiple listing service is expected to be more modest in 2012, CMHC said.
Economists have said they expect Canadian home prices to fall between five and 10 per cent as the real estate market cools off in 2012 once mortgage interest rates rise again.
Adrienne Warren, a senior economist at Scotiabank who specializes in real estate, said it makes sense that both CREA and CMHC revised their forecasts, which she said reflects the stronger-than-expected first half of the year and also the anticipation that interest rates are not going to rise until next year.
“I think where there’s a little more risk is when we eventually see interest rates move up, you’ll see demand cool off a little more,” she said.
With files from The Canadian Press.