Home Builders Expecting a Slower Year for Multi-family Starts in 2017
Richard Goatcher, Economic Analyst, CHBA – Alberta
Following a sizable decline in new housing activity last year, Alberta’s home builders are expecting reductions to moderate in 2017. A modest improvement in single-detached starts this year will be offset by continued weakness in the multi-family sector, particularly apartments.
A sample of CHBA – Alberta members was polled in January and early February on their expectations for housing starts in 2017. The consensus forecast calls for total housing starts across the province to decrease this year by 3.4% from 2016 levels to 23,700 units. Last year, new building starts across Alberta reached 24,533 units, representing a decline 34.2% from the previous year and the weakest performance for the industry since 2009.
Single-detached starts this year are projected to reach 11,800 units across the province, representing an increase of 3.3% from 2016. However, high inventories of unsold condominium apartments in both Calgary and Edmonton will put a damper on multiple dwelling starts this year. Alberta’s multi-family segment is expected to see a 9.2% decline in activity this year to 11,900 units.
The CHBA - Alberta members who responded to the semi-annual survey were invited to comment on the factors shaping their outlook for business conditions during the year ahead. Most respondents mentioned concerns over the continued weakness of the provincial economy as negatively impacting their outlook for new home sales this year. Low levels of in-migration from other parts of Canada were resulting in slower demand for new homes and undermining investment in residential construction. Tighter mortgage rules and increased government fees, taxes and levies were also expected to erode affordability and undercut demand this year, particularly from first-time buyers.
Other concerns about the business environment in 2017 that were raised by the association’s members included carbon tax inflation, high rental vacancies, and the rising costs of imported building materials associated with new tariffs and the low Canadian dollar. On the plus side, unsold inventories are expected to decline as the year progresses, resulting in an improvement in building activity this fall. Many of the members providing comments thought the province’s economy should improve in 2018 thanks to a gradual recovery in the key energy sector.