The economic uncertainty and surplus of unoccupied new units will postpone Alberta’s recovery in single-detached construction for another year. Following a nearly 50 per cent reduction in 2008, single-detached starts will slip further in 2009,says Martin Lapedus. 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 generous incentives offered by builder should help reduce them further.
The adjustment in Alberta’s multifamily market to weaker economic conditions has lagged that of the single-detached market. As a result, multi-family starts will face a stronger downward adjustment in 2009, likely in the neighbourhood of 50 per cent. 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.
Despite price reductions for existing homes, low financing costs, and buyers’ market conditions, Alberta’s economic environment has prompted more cautious purchasing behaviour by households, especially for big-ticket items such as real estate. As a result, existing home sales in Alberta 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.
Alberta’s average resale price will be slow to rebound from the first decline in 13 years. Despite a decrease in the number of active listings, slower sales will ensure the market remains fixed in buyers conditions. As a result, the annual average price in 2009 will decline for the second consecutive year.
In Saskatchewan, a 49 per cent increase in building activity in 2007, followed by a 13 per cent increase in 2008 has led to a rapid rise in the supply of single-detached housing.
With complete and unabsorbed inventories up in most markets, a significant reduction in the pace of construction will be required this year to reduce these inventories to manageable levels. Builders will have an opportunity for modestly higher production in 2010, provided inventories reach their peak some time later this year.
With elevated construction levels in the last few years, the supply of condominium units in Saskatchewan has also reached record highs. Given the expectation of rising inventories, builders will adjust the pace of multifamily construction moving forward.
After a 25-year high in 2008, a strong decline in production is expected this year. Assuming inventories are managed appropriately, Saskatchewan’s multi-family developers will see modestly higher starts in 2010.
Saskatchewan’s recent price escalation hindered resale demand in the second half of 2008, contributing to the growth in inventories and lower month-over-month prices. In the face of economic uncertainty, residential sales in Saskatchewan will face further moderation in 2009 with activity down 16 per cent.
Toward year-end, modest price declines and a multitude of listings will provide opportunities for buyers, slowing the drop in sales. Under these conditions, sales will stage a modest rebound through 2010.
After leading provincial growth in 2007 and 2008, the average resale price in Saskatchewan will see little change over the next two years. An excess supply of listings and strongly motivated sellers has resulted in recent month-over-month price declines. In this environment, the average price will be lower by a few per cent this year. Once resale listings moderate and sales improve into 2010, price growth will slowly return.
After an impressive performance in 2008, single-detached starts in Manitoba will post an 11 per cent decline this year. Starts will remain elevated in the first part of 2009, thanks to a backlog of orders from the previous year. However, activity will slow over the duration of 2009 due to the economic uncertainty facing buyers and concerns over rising inventories. The weaker construction in 2009 will ensure that price growth is restrained and inventories are minimized, creating an opportunity for higher starts next year.
Manitoba’s multi-family starts will continue to moderate from their 2007 peak, reaching 1,400 units this year before increasing slightly in 2010. Winnipeg’s share of provincial multi-family construction will be lower than historical standards. This will be due to rising inventories in Winnipeg and heightened demand for multi-family units in other markets, particularly for rental tenure.
The number of existing home sales in Manitoba will decline by more than 10 per cent in 2009 before posting a modest rebound in 2010.
Demand will be weak in the first half of this year due to the current economic environment and cautious buyer sentiment. However, strong labour markets, a growing population, and relatively low prices should contribute to a recovery in the latter part of the year and into 2010.
Manitoba’s six consecutive years of double-digit resale price growth will come to an end in 2009. Resale market conditions are shifting in favour of the buyer, owing to a increase in listings and moderating sales. Given such conditions, a modest decline to Manitoba’s average resale price is expected in 2009.
Look for a gradual shift to a more balanced market in 2010, resulting in modest price gains of nearly four per cent.