Alberta and British Columbia stand in sharp contrast to the rest of the country in Canada Mortgage and Housing Corp.’s latest housing market outlook.
The national housing agency is projecting a decline in housing starts across most of Canada this year, and for residential construction in 2015 to be flat.
An exception is Alberta, where CMHC anticipates a nearly four per cent increase in building activity this year, followed by a slight dip in 2015.
In Red Deer, housing starts are expected to jump 9.1 per cent to 855, up from the 2013 tally of 784. Single-detached houses will account for 415 of the 2014 total, said CMHC, with units in multi-family projects adding 440.
The 2014 projections for Red Deer have been boosted since CMHC’s previous housing market outlook, issued in February. The increased optimism appears justified by building activity in the city during the first quarter of 2014, with housing starts spiking nearly 21 per cent as compared with the same three-month period of 2013.
For 2015, CMHC said residential starts in the city should gain another 2.9 per cent, bringing the number to 880.
Expectations are mixed across Alberta’s seven largest urban centers. CMHC is anticipating a 16 per cent increase in housing starts this year in Calgary, with Medicine Hat expected to improve by 9.8 per cent.
Conversely, a 15.7 per cent fall in housing starts in the Regional Municipality of Wood Buffalo is forecast, with an 8.8 per cent decline in Edmonton, a 4.4 per cent decrease in Grande Prairie and a 4.3 per cent slide in Lethbridge.
CMHC said in its outlook that record in-migration to Alberta last year is contributing to the overall rise in single-detached starts, as are fewer active listings in the resale market. Alberta’s tight labour market will continue to draw migrants, said CMHC, which will boost incomes and support housing demand.
In the case of Alberta’s resale market, transactions through the Multiple Listing Service are projected to climb nearly four per cent in 2014, followed by a 2.2 per cent gain in 2015. MLS resales in Red Deer will increase by 3.2 per cent to 5,050 this year, said CMHC, and gain another two per cent to 5,150 in 2015.
Elsewhere in Alberta, resales this year are expected to move up by 4.5 per cent in both Calgary and Grande Prairie, and by 3.6 per cent in Medicine Hat, 2.7 per cent in the Regional Municipality of Wood Buffalo, 2.2 per cent in Lethbridge and 1.3 per cent in Edmonton.
The average price of MLS sales in Red Deer are expected to move up 3.4 per cent to $308,500 this year, and by 2.8 per cent to $317,000 in 2015. The average resale price in Alberta is forecast to rise 3.9 per cent to $396,000 in 2014 and 2.5 per cent to $406,100 in 2015.
Although it expects Canada’s housing market to continue to slow — especially in large urban areas like Toronto — CMHC doesn’t foresee a major crash.
“When you look at how the market has evolved over the past few years it is indeed headed toward a soft landing,” said Mathieu Laberge, the agency’s deputy chief economist.
Laberge said the fundamentals, particularly population, employment and economic growth, low interest rates and the pool of first-time buyers all support the market.
“When we set house prices against those fundamentals, we do see some modest level of over-evaluation, but it’s within historical norms.”
CIBC housing analyst Benjamin Tal added that a crash would require a “trigger,” such as sharply rising mortgage rates. But rate hikes aren’t anticipated until the spring of 2016, and even then are expected to be small.
CMHC did caution that there are risks to its moderate forecast, including high household debt, economic difficulties in China and other emerging economies, and the high number of condos under construction in some markets.
With files from The Canadian Press.