The Canada Mortgage and Housing Corporation (CMHC) says new data suggests the spectre of overbuilding in Alberta is becoming very real.
“There is low evidence of overbuilding overall at the national level, but there are growing concerns surrounding overbuilding in Calgary, Edmonton and St. John’s,” the CMHC said in a news release on Thursday.
The CMHC said while Alberta’s gradual recovery from the 2014 oil price crash is likely to see more people come to Alberta and help the province’s housing markets, overbuilding is “expected to put downward pressure on new housing construction.”
In its fourth-quarter housing market assessment for Edmonton, the CMHC said its concerns about overbuilding were mainly based on the number of unsold row housing combined with rising rental apartment vacancy rates since October 2015.
“Evidence of overbuilding in the Edmonton housing market increased from moderate to high as imbalances in both the ownership and rental markets were detected,” said Brent Weimer, CMHC’s principal in market analysis.
“The inventory of completed but unsold units, mainly concentrated in the apartment sector, has now moved above the level indicating overbuilding.”
Overall, however, the CMHC’s assessment of Edmonton found the city’s housing market only faces a “moderate degree of vulnerability,” the same as in the previous quarter.
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The report found some positives for Edmonton’s housing market. Unlike Toronto and Vancouver, the CMHC says there is “low evidence” of price acceleration and overvaluation in Alberta’s capital.
“Both the New House Price Index and the Teranet-National Bank House Price IndexTM indicate an absence of price acceleration in the Edmonton market,” the market assessment reads. “Although the MLS average price in the first half of this year was up 2.6 per cent compared to the first half of 2016, much of the increase is due to changing sales composition.
“Existing home market conditions continue to favour the buyer, and future price growth is expected to remain soft as recent advances in the number of new listings have outpaced increases in sales.”
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The CMHC also said Edmonton’s overall economic fundamentals continue to be “favourable” as employment went up for a second quarter and weekly earnings are beginning to “trend higher.”
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