Oil slump will slow housing markets in 2016, CMHC says

Crashing oil prices will take a toll on Edmonton’s housing markets in 2016, whether it’s new and resale homes or rental units, the Canada Mortgage and Housing Corp. forecast Thursday at its housing outlook conference.

“Overall next year, we are going to see a relatively slow market, compared to, say, where we were in 2014,” said Christina Butchart, CMHC principal, market analysis for Edmonton. “The effect of low oil prices is definitely having an impact on different sectors of the housing market. It’s affecting them all a little differently.

“But if there is one take-away, it is going to be a slower feeling to next year than there was — not necessarily this year — but compared to 2013-2014.”

Here’s a look at what’s expected in the three main sectors of the Edmonton housing market in 2016.

RESALE

A slower economy isn’t churning out the jobs it used to, so fewer people are moving to Edmonton. That’s reduced Multiple Listing Service sales in 2015 and next year won’t be much better, Butchart says.

MLS sales will fall to 17,500 units in 2015, inch back up to 17,800 in 2016 and rise further to 18,300 in 2017, CMHC says.

“This year, we saw quite a pullback in the resale market and we’ve seen quite a rise in the number of listings on the market. Next year, we expect that the resale market will likely increase a little bit but it likely won’t happen until the second half of the year and even the increase we’re looking at will be quite small.”

Buyers currently hold the advantage over sellers in the market, Butchart said. “We’re looking at longer selling times and we’re starting to see prices soften just a little bit in the market.”

The average resale price is forecast at $366,000 for 2016, up from the predicted average resale price of $363,000 for 2015. By 2017, the improving economy will push it up to $374,000, she said.

RENTAL

CMHC believes Edmonton’s vacancy rate will go up over the next three years as growth in the supply of rental accommodation surpasses demand. The vacancy rate in the Edmonton census metropolitan area is expected to be 3.0 per cent in 2015, 3.5 per cent in 2016 and 3.7 per cent in 2017, the federal agency says.

“One of the things we’ve been dealing with in the last couple of years is an increase in the number of rental apartments in Edmonton,” Butchart said. “We currently have between 2,500 to 3,000 additional rental apartments under construction in Edmonton.”

The forecast average rent for a two-bedroom apartment in 2015 is $1,265. In 2016, it will rise to $1,295 and again in 2017 to $1,320.

“If you look at average rents, we are going to see a little more upward movement because these new units that are coming on are renting for more than the traditional stock is. But if you look at rent growth, we’re already seeing that that’s slowing down. We were at five or six per cent even just last year and now we’re close to the two-per-cent mark.”

NEW

The multi-family residential market had an especially strong year in 2015, but the pace of construction will weaken as the year closes out and into 2016 as the economy and net migration both slow down. Multi-family housing starts are forecast at 10,500 units in 2015, 5,500 in 2016 and 5,000 for 2017.

“On the single-detached side, we are already seeing that builders have pulled back and we’re going to continue to see that next year with them pulling back on the number of houses they’re starting,” Butchart said.

Weaker economic conditions and a well-supplied resale home market will curtail single-detached home construction. Single-detached starts will total 5,900 in 2015, 5,600 in 2016 and 5,800 in 2017.

  • Edmonton Journal
  • BILL MAH bmah@edmontonjournal.com twitter.com/mahspace EDMONTON JOURNAL

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