Alberta Housing Market Forecast to Rebound in 2016

Mario Toneguzzi, Calgary Herald
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Published on: August 20, 2015 | Last Updated: August 20, 2015 6:00 AM MDT

After a tough year in 2015, Alberta’s resale housing market is expected to rebound in 2016, according to a report by RBC Economics.
The bank’s senior economist, Robert Hogue, is forecasting sales in the province to dip by 17.8 per cent this year from 2014 to 59,000 transactions – the largest drop in the country.
But Alberta is then expected to see the biggest year-over-year hike in sales in 2016 of 7.1 per cent to 63,200 units.
Despite the drop in sales this year due to a slumping economy and continued depressed oil prices, the average sale price in Alberta is forecast to climb by 0.7 per cent to $378,500 and grow by another 2.1 per cent next year to $386,600.
However, the news isn’t that good for new home construction. Hogue is calling for an annual decline of 12 per cent in 2015 to 35,700 units followed by another 15.1 per cent decrease in 2016 to 30,300 units.
At the national level, the RBC report said the number of resales in the country would jump by five per cent this year to 505,400 this year but drop by 0.7 per cent next year to 501,800.
Hogue is expecting the national average price to rise by 4.6 per cent this year to $392,600 and by 3.2 per cent in 2016 to $405,100.
As for housing starts, Canada will mirror what is happening in Alberta but at a lesser scale. Starts this year are expected to drop by 1.9 per cent year-over-year to 185,800 units and fall by another 2.1 per cent next year to 181,500 units.
mtoneguzzi@calgaryherald.com

Calgary at Low Risk of Housing Correction, says CMHC

                                                                                        Real estate listing in Calgary. Calgary Herald

Mario Toneguzzi, Calgary Herald

 

Published on: August 13, 2015 | Last Updated: August 13, 2015 4:53 PM MDT

Calgary’s housing market is not under threat of a correction despite a downturn in the local economy, Canada Mortgage and Housing Corp. said in an analysis Thursday.
Its assessment of 15 metro markets lists Calgary as “low risk” while Toronto, Regina and Winnipeg were rated “high risk.” The review considered four factors — overheating; acceleration in house prices; overvaluation; and overbuilding — as of the end of March.
“The low price of oil has affected many different sectors of the economy, affecting employment and income growth, and increasing the unemployment rate. Weaker labour market conditions have also slowed migration to the region,” CMHC said of the Calgary-area market.
It said acceleration in prices and overbuilding were considered stable, while the threat of overheating had decreased. The risk of overvaluation rose to moderate.
“Given the information we had at that time, we’re seeing a modest amount of overvaluation,” said CMHC chief economist Bob Dugan. “If there were to be some sort of an economic event to cause the fundamentals to change dramatically that could affect our assessment.”
Toronto was added to the CMHC’s list of troubled markets, with rapid price growth and overvalued home prices putting the country’s biggest real estate market at high risk of a correction, CMHC said. Regina and Winnipeg were previously placed in the high-risk category in April.
In Regina, price acceleration, overbuilding in the condo market and overvalued home prices are responsible for the heightened housing market risk, according to the report, although CMHC said price growth is beginning to wane. In Winnipeg, overvalued home prices and overbuilding have been flagged as concerns.
Meanwhile, Vancouver — one of the country’s priciest real estate markets — was deemed low risk, even as home prices there continue to soar. The benchmark price of a detached home in metropolitan Vancouver hit $1.1 million in July, up 16.2 per cent from a year ago, the Real Estate Board of Greater Vancouver said last week.
Don Campbell, senior analyst with the Real Estate Investment Network, said Calgary’s low-risk rating was interesting given the year-long decline in oil prices that could cause the local market to become “more volatile.”
“The lack of rental properties in that mid-range size and price is holding back many people from selling their homes in Calgary, however, as the pain deepens in the oil and gas market, many will be forced to sell as this downturn does not seem to be short in nature,” he said. “This adds risk to average price drops and demand, especially in the coming November to February market window.”
Statistics Canada said Thursday that new home prices in the Calgary area rose 0.1 per cent in June.
“Higher land prices were largely offset by builders reducing prices because of market conditions,” the federal agency said. Prices were up 0.7 per cent year-over-year.
In its latest report, the Calgary Real Estate Board said the average MLS sale price for July was $476,446, down about 1 per cent from a year ago while the median price of $435.000 grew by 2.35 per cent. The benchmark price, which CREB identifies as a typical property sold in the market, was largely unchanged at $455,400.
With files from The Canadian Press
mtoneguzzi@calgaryherald.com

The Perfect Storm to Create a Rental Unit in Your Property

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Garry Marr | August 7, 2015 1:30 PM ET
More from Garry Marr | @DustyWallet

 

Between the Conservatives' proposal to bring back the home renovation tax credit and CMHC's change to allow rental income to count toward your mortgage, why wouldn't you consider adding an income suite?

The renovation market, already at record levels in terms of spending, could get a major boost from Conservative plans to introduce a tax credit worth up to $750.

Experts are divided on what impact a federal Conservative promise to revive a home renovation tax credit could have on the real estate industry, with some predicting it could add more fuel to red-hot housing markets while others say it likely wouldn’t have any impact at all

'Playing with fire': How the Tories' renovation tax credit may affect Canada's housing market

One area that money could get funnelled into is secondary rental units, like basement apartments, which are also set to get a major lift because of changes made by Canada Mortgage and Housing Corp.
“I think people do a fair amount of it,” said Peter Norman, chief economist of Altus Group, referring to how much of the annual $68 billion renovation market goes into creating income suites. “(A new tax credit) obviously comes into play into the renovation numbers, but it’s a small amount. There are lot of reasons why someone might create a basement apartment suite and lots of reasons not to.”
If you’re on the fence, Norman says one reason you might shy away from creating a rental suite is that you would lose a portion of the principal residence exemption on capital gains. But, at the same time, the extra income is attractive to people struggling with house prices in cities like Toronto and Vancouver, where the average home is selling for about $1 million and $1.4 million respectively.
CMHC, the Crown corporation that is the larger provider of mortgage default insurance in the country, announced changes in July that will make that rental income even more attractive for homeowners. It will allow homeowners to count all the income from their secondary units when qualifying for a loan instead of the current limit of just 50 per cent of income.
In order to qualify under the changes, which take effect Sept. 28, secondary units must be legal and conform to local municipal codes — all the more reason to do a legal renovation instead of something under the table with cash. Altus has found about 40 per cent of respondents in a recent survey  believe small renovation jobs (under $5,000) are done with cash.
The promise from Stephen Harper to reintroduce the Home Renovation Tax credit and make it permanent would also likely encourage legal renovations because in order to qualify for the credit you need receipts. The credit would be for 15 per cent of major home renovations  between $1,000 and $5,000 annually.
CMHC says one reason for changing its rules is that secondary suites create more affordable housing. Vacancy rates across the country remain low, and the Crown corporation reported in June that the national average for vacancies in the country’s 35 largest markets was just 2.9 per cent.
But not everybody thinks further boosts to the housing market is a good thing. Allowing homeowners to count income from rental units could create larger loans, raising prices.
“The Conservative campaign pledge to introduce a new home renovation tax credit if elected this autumn is possibly more misguided than the NDP and Liberal pledges to raise taxes during a recession,” said David Madani, Canada economist for Capital Economics. “With renovation investment and household debt at record highs, encouraging households to invest more at a time when housing is widely believed to be hugely overvalued would create even greater imbalances in the economy.”
gmarr@nationalpost.com