Calgary vacancy rates quadruple from last year: CMHC

Calgary's once-cramped rental market has space to spare, and it could have implications for the city's new and resale home sectors.

In its recent fall rental survey, Canada Mortgage and Housing Corporation's (CMHC) reported vacancy rates in Calgary's rental sector has nearly quadrupled over the previous year, jumping to 5.3 per cent in October from 1.4 per cent at the same time last year.

"The call volume has dropped off considerably in the last 12 months," said Mainstreet Equity Corp. CEO Bob Dhillon, whose Calgary-based real estate company owns and operates rental properties in the Calgary area, as well as in British Columbia and Saskatchewan.

Conditions shift in September, according to CREB®

Housing statistics from September confirm that unbalanced conditions in some areas of Calgary's resale residential market are starting to push the entire sector into buyers' territory, according to CREB®.

Driven by excess inventory in the apartment sector, the overall market's sales-to-new-listings ratio — a key indicator of a buyer's market — declined further in September to 47 per cent, according to the board. That means less than five out of every 10 new listings sold during the month.

In August, the ratio hovered around 60 per cent, which was firmly in balanced conditions, according to CREB® chief economist Ann-Marie Lurie.

As Canada Mortgage and Housing Corp.'s market analyst for Calgary, Richard Cho is tasked with keeping tabs on the housing market in one of Canada's most dynamic cities.

CREB®Now caught up with Cho to talk about the economy, what's in store for Calgary's real estate sector and why he enjoys calling the city home.

CREB®Now: ?How are current energy prices affecting the city of Calgary?

CHO: A large part of Calgary's economy is tied to the performance of the energy industry. The decline in oil prices has posed some challenges for many oil companies, resulting in reductions to capital expenditures, hiring freezes, and layoffs. This has also impacted many other industries, from large companies to small business owners, that either directly or indirectly benefit from the energy sector. While there are still areas of Calgary's economy that are holding steady and creating jobs, overall economic activity is expected to slow down this year.

Several reports have sounded the alarm our real estate market is grossly overvalued, but industry watchers contend Calgary isn't poised for the big crash some are forecasting

Reports suggesting Calgary's housing market is over-valued, supported by recent price corrections, are missing many of the obvious indicators saying otherwise, say experts.

The metrics used to measure affordability simply do not back up the argument that Calgary's real estate market is highly overvalued and ready for a precipitous drop in home values, said Robert Kavcic, a senior economist with Economic Research BMO Capital Markets in Toronto.

"One of the (metrics) we look at is the average mortgage payment as a share of income, and right now that's a little bit above the long-run norm of 27 per cent at about 29 per cent," he said.

Resale market impacting housing starts outlook

The sound of hammers has quieted in Calgary.

Following a record-breaking year for new home construction in the city, the pace has slowed considerably in 2015.

Through the first five months of year, the number of new homes starts in Calgary has numbered 3,954 – a 32.5 per cent drop from the same period in 2014.

The decline was even more dramatic in April, with just 777 homes breaking ground during the month compared to 1,952 during the same time last year – a decline of more than 50 per cent.