Evidence of overbuilding remains high in Calgary, but the peak inventory count for apartment units, the largest share of inventory, occurred in December 2017.
It has since declined, according to the latest Housing Market Assessment report by Canada Mortgage and Housing Corp.
The report, released Thursday, said Calgary’s market had a “moderate” degree of vulnerability at the end of June.
“Demand fundamentals were consistent with downward pressure on home prices in Calgary, while evidence of overbuilding was detected in the first quarter of 2018. However, if the decline in per capita inventory of complete and unsold units persists, the level of overbuilding could move below the critical threshold next quarter,” said Braden Batch, the CMHC’s senior analyst of economics for Calgary.
The CMHC looks at four factors:
- overheating of demand in the housing market, wherein sales significantly outpace new listings;
- acceleration in house prices, which could be partially reflective of speculative activity;
- Overvaluation in the level of house prices, which indicates that levels are not fully supported by fundamental drivers such as income, mortgage rates and population;
- Overbuilding of the housing market, when the rental market vacancy rate and/or the inventory of newly-built housing units that are unsold is elevated.
“The absorption rate of condos at completion averaged 83 per cent year to date as of May 2018 compared to 67 per cent in the same period last year, helping to reduce inventory and mitigating the same buildup of inventory experienced in 2017,” said the CMHC report.
“Evidence of overbuilding remained high in Calgary. Per capita complete and unsold inventory remained above the critical threshold, despite trending downward. The peak inventory count for apartment units, the largest share of inventory, occurred in December 2017, and has since declined. Recent apartment starts have pushed construction levels upward, while current construction levels imply a similar flow of new apartments in 2018 as in 2017.”
Respected business writer Mario Toneguzzi is a veteran Calgary-based journalist who worked for 35 years for the Calgary Herald in various capacities, including 12 years as a senior business writer.
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