Calgary home sales, prices and construction drastically down due to pandemic: CMHC report

Tuesday, June 23, 2020   /   by Sergey Korostensky

Calgary home sales, prices and construction drastically down due to pandemic: CMHC report

CALGARY -- Experts predicted the numbers would be bad and a new report says they were right — according to the Canada Mortgage and Housing Corporation (CMHC), Calgary’s real estate market is in for a rough ride in 2020. 

The report, which examines the first half of the year and makes predictions for the rest of 2020 and as far out as 2022, shows sales, prices and housing starts are all taking a hit due to the global pandemic. 

“COVID-19 has had unprecedented impacts on Canada’s urban centres,” said deputy chief economist Aled ab Lorwerth.

“Short-term uncertainty will lead to severe declines in sales activity and in new construction.”

The report uses data from the first few months of the year to make predictions about where major Canadian markets are trending. In Calgary, the early effects have been noticeable when it comes to both owning and renting. 

According to the report, the average home price in the city will continue on its downward trajectory for the rest of the year. The report predicts prices to be as much as 12 per cent lower in 2020.

That could result in the average price in the city dipping below $400,000 by the end of December.

The CMHC document says sales are also due for a hit. It found existing home sales are likely to decline between 13 per cent and 27 per cent this year before a gradual recovery in 2021 and 2022. 

New construction in Calgary is also down. The report cites “restrictions to protect public health and their impact on demand for oil and gas.” 

The energy industry is mentioned multiple times in the report. The CMHC says uncertainty surrounding the sector will lead to a rough stretch in both Calgary and Edmonton.

In Alberta’s capital, it predicts demand to fall drastically in 2020. In Calgary, the CMHC says to expect “a significant decline in the pace of new construction in the range of 43 per cent to 64 per cent in 2020.”

Like in Edmonton, that figure is largely chalked up to demand. 

Most of the numbers in the report point to a bounce back in the next few years, but an exact timeframe for that optimism is currently unknown, according to Lorwerth. 

“There is significant uncertainty with respect to the path and timing of the recovery,” he said. 

Canada-wide, the report cites lower immigration and less mobility within the country as a deterrent to starts for the rest of 2020. It predicts that could lead to vacancy rates increasing in the rental market.

In Calgary, it predicts significantly reduced rental demand.

That, paired with “a large number of new rental units” and an uptick in long-term availabilities — presumably due to trouble in the Airbnb industry — could mean the vacancy rate could stay high for years to come. 

Starts, sales and prices are down across the board in almost every city mentioned in the report. Both Toronto and Ottawa are the exception to the rule, the report predicts an uptick in average home prices in those cities. 

The report says Canada is expected to see a major drop off in residential construction in 2020.