Home Builders Anticipate Modest Recovery in 2017
Richard Goatcher, Economic Analyst, CHBA – Alberta
Following a major reduction in new housing construction this year, Alberta’s home builders are calling for a modest rebound in 2017. However, many builders are cautious in their outlook for business conditions in 2017 due to the prolonged downturn in the province’s energy sector.
A sample of CHBA – Alberta members was polled in August on their expectations for housing starts in 2016 and 2017. The consensus forecast calls for total housing starts across the province to decrease this year by 39.5% from 2015 levels to 22,550 units. This would represent the worst performance for the new home building industry since the previous recession in 2009. Next year, our members expect a modest 5.7% increase in new home starts to 23,825 units. New home building activity, both this year and in 2017, is expected to be well below the five-year average of nearly 34,600 total units started between 2011 and 2015.
Alberta’s multi-family segment will experience the largest decline in activity this year, falling 47.2% from last year’s total to 12,000 units. Rising unsold inventory levels in both Calgary and Edmonton will continue to put a damper on multiple dwelling starts going into 2017. Well-supplied resale condominium apartment markets are favouring buyers and putting downward pressure on prices. This environment offers little incentive for builders to bring more units onto the market in both metro areas. Single-detached starts this year are projected to reach 10,550 units across the province, representing a 27.6% decrease from 2015.
In 2017, single-family starts are expected to increase by 9.2% over the current year to 11,525 units. Multiple unit starts will be slower to recover, increasing only 2.5% in 2017 to 12,300 units.
The CHBA-Alberta members who responded to the semi-annual survey cited concerns over the continued weakness of the provincial economy as negatively impacting their outlook for new home sales going into 2017.
While the province continues to benefit from added newcomers from outside Canada, population growth has slowed due to higher outmigration to other provinces. The resulting weakness in household formation is a disincentive for residential investment. Rising taxation levels, delays in pipeline approvals, high unemployment and weakened investment in the province’s key energy sector were also mentioned as areas of concern by builders when they consider business prospects in the coming year.