Alberta’s economy and new home construction will weaken in 2009.
Weaker global demand, lower energy prices, and heightened costs will postpone capital spending for oil sands, upgrader, and pipeline projects. Meanwhile, despite the elimination of $1 billion in health care premiums, personal consumption will moderate.
However, government expenditures will be an important contributor to economic growth this year, as a result of a commitment to heightened infrastructure spending. The recent decline in the Canadian dollar will also provide an important offset to the effects of low energy prices and weaker demand for Alberta’s exports. Assuming energy prices and global economies rebound by 2010, economic growth in Alberta will also stage a recovery.
The number of deferred energy projects will weigh on Alberta’s labour market this year. Employment growth will be cut to less than one per cent. Construction employment related to the oil sands will be notably weaker, but should not have severe implications on home ownership demand as the housing requirements for such staff would have been temporary. Employment growth is expected to improve in 2010, provided the economic recovery occurs.
A bright spot to Alberta’s outlook will be net migration. Given the weaker employment gains and slower economic growth, interprovincial migration will remain weak by historical standards. However, international immigration will be heightened due to the province’s history of labour shortages and high wages, as well as more aggressive policies to attract migrants.

In Detail

Single Starts: Heightened uncertainty regarding economic prospects and a surplus of unoccupied new units will postpone the recovery in single-detached construction for another year. In fact, single-detached starts will likely slip further in 2009. Edmonton will be a notable exception due to the velocity of the downturn that occurred last year. Provincial starts should rebound in 2010, provided the adjustment in starts sufficiently draws down inventories. Complete and unabsorbed units are in the process of peaking and current incentives should help reduce them further.

Multiple Starts: : Multi-family developers have been slower to adjust to the weaker economic conditions than their singledetached counterparts. As a result, multi-family starts will face a stronger downward adjustment in 2009. Calgary will record the strongest reduction in starts this year, where the construction of several apartment condominium projects has already been halted.
Provided the necessary adjustment is made this year, a modest gain in starts will occur in 2010.

Resales: Despite price reductions, low financing costs, and buyers’ market conditions, the current economic environment has prompted more cautious behaviour by households, especially for bigticket items such as real estate. The prospect of additional price reductions will further postpone the decision to purchase. As a result, existing home sales will moderate for the third consecutive year in 2009. Once buyers gain confidence that prices have stabilized and economic conditions are improving, modestly higher sales should occur next year.

Prices: The average resale price will be slow to rebound from the first decline in 13 years. Despite a decrease in the number of active listings, weaker sales will ensure the market remains fixed in buyers conditions. As a result, the annual average price in 2009 will post a decline for the second consecutive year. As the market moves toward balanced conditions by 2010, resale price growth should return.

Moishe Alexander says that as the market moves toward balanced conditions by end of 2009 to mid 2010, resale price growth should return.