In its fourth quarter housing market outlook, issued on Oct. 30, Canada Mortgage and Housing Corp. painted a bright picture of Red Deer’s housing sector.
The national housing agency projected that residential construction starts in the city would end 2013 nearly 22 per cent ahead of last year’s tally, with a further 3.6 per cent jump in 2014. And in the case of Central Alberta’s resale market, it said Multiple Listing Service would jump 11.5 per cent this year and another 4.2 per cent in 2014.
Average MLS selling prices, it added, would grow by 7.1 per cent and 3.7 per cent respectively in those two years.
On Wednesday, CMHC market analyst Regine Durand offered an explanation for the robust market.
Speaking to the Advocate following CMHC’s housing market outlook conference in Calgary, Durand said several factors have contributed to the increased activity in Red Deer’s residential construction sector.
Key among these has been the financial incentive that builders have to put up new houses.
Continued low interest rates have reduced financing charges for builders, but they’ve also benefited from favourable costs in other areas.
For instance, said Durand, construction wages in Alberta increased by much less this year than they did in 2012, or even compared to the five-year average.
Land prices have also gone up only marginally, she said.
Meanwhile, added Durand, home prices in Red Deer have climbed — by eight per cent in the case of single-detached homes in the city. That’s improved the return on investment for builders.
At the same time, demand for new and resale homes has been strong, with the low interest rates also a factor here.
Durand explained that low mortgage carrying costs make it more affordable for home-buyers to enter the market, and create a greater incentive for existing owners to move up to bigger houses.
“They ask for lower prices than would be necessary in a higher interest rate environment.”
However, prices have risen to a point that many homeowners are now listing their property, she said.
“Folks are reaching that price benchmark level where they have incentives to list and they know the proceeds from selling will be sufficient to repay their mortgages and they’ll have enough to cover the mortgage payments on their next move-up home.”
Rising prices also reinforce in the minds of people that residential real estate is a good investment, added Durand, which stimulates buying.
The strong Alberta economy is also helping, she said, with income levels in the province growing, new jobs being created and more people moving to Alberta.