New data show that the economic slowdown is weighing heavily on Alberta’s housing industry. Housing starts are down by about 56 per cent (year-over-year). Unfortunately for those that sell new homes, a large number of these are staying vacant.
The number of completed but unabsorbed homes has grown significantly in both Edmonton and Calgary over the past year. Completed but unabsorbed houses are residences (single and semi-detached) that are newly built that don’t have a binding, non-conditional agreement made to buy or rent the house.
In Edmonton, the number of unabsorbed homes has skyrocketed (+66 per cent) and have now reached record highs. Edmonton has about 35 more new but unabsorbed homes than they did at their peak in September 2008. The total in February stood at 1328.
Calgary’s number of vacant new homes hasn’t grown at the same pace as Edmonton’s (+27 per cent), but they too are higher than in previous years. But, even though this number is mounting, the number of houses that remain vacant are still well below (385 houses) highs reached in February 2009. The total in Calgary stood at 489 in February.
An increasing number of new and unabsorbed houses is troubling for a number of reasons. Firstly, having a rising number of unabsorbed houses can have a negative effect on prices. And, at a time when construction is already slowing, excess supply of housing stock is likely to slow the construction industry even further.
Unfortunately, it’s likely that we will continue to see unabsorbed housing push higher, especially in Edmonton. Given the latest building permit numbers, homebuilders in Alberta’s capital city appear to be the main driver of our province’s housing sector. *
*Nick Ford • Economist , ATB Financial