September 8, 2022

Real Estate Developers Start to Alleviate Housing Shortage Problem

One of the big issues that has surfaced this year is the lack of housing supply across the country that’s needed to meet the current demand in both homeownership and rental.

The Calgary region has also been experiencing what many major Canadian metropolitan areas have been going through lately.

But in Calgary and across the country the real estate industry is responding with more homes being built as demand continues to rise.

As Michael Mak, Senior Analyst, Market Insights for Canada Mortgage and Housing Corporation, puts it: “Record low inventory of homes in 2021 has led to a resurgence in construction activity following strong overall housing demand.”

Mak was quoted in the most recent CMHC Housing Supply Report released in May.

It showed that in the Calgary region, housing starts in 2021 rose to their highest levels in half a decade, supported by a positive economic and demand outlook. Calgary continues to expand both north and south through undeveloped land. Single-detached homes and apartment units under construction trend higher after a brief pause in 2020.

According to the CMHC’s most recently seasonally-adjusted annual rates, as of July, single-detached starts are 6,207 so far this year which is the same as a year ago but the ‘all other’ category, which includes multi-residential, is up by two per cent to 16,272.

“Overall annual construction starts in Calgary have trended higher since 2016. We have seen an abrupt drop in 2020 due to general economic instability and COVID related measures that slowed down planned projects. New apartment construction in 2021 rebounded to levels last seen in 2015,” says the CMHC Housing Supply Report. “This is supported by: an accommodative monetary policy; a return of economic certainty as the pandemic progresses. Single-detached starts also rebounded to the highest annual level since 2014. Demand for these homes was pronounced and reflected in the resale market. Approximately 40 per cent of new apartment construction was targeted towards rental use. Between 2011 to 2020, only an average of 15 per cent of new apartment starts were intended for use in the primary rental market.”

According to the May CMHC report, Calgary now has 8,700 apartment units under construction, approaching highs that were last seen in 2015. Of these 8,700 units, 4,200 are considered primary rental — the largest number of rental units the city has ever had under construction at one time.

“The inventory of completed and unsold homes decreased as demand for housing picked up in 2020 and 2021. After 2014, apartment condos that were completed were not readily absorbed as demand weakened. This led to a peak in unsold apartment inventory in 2017. The fall in inventory was most prominent in 2021 with less than 400 apartment units remaining that are considered complete and unsold, compared to three times that amount in 2017. Medium rise buildings continue to be the most popular structure size. Apartment starts in 2021 were most likely to be mid-rise. Almost half — 49 per cent — of structures started were between four to six stories tall. This is a continuation of a trend that started in 2014, when the average number of stories built per structure began to approach four. Before 2014, between 70 and 90 per cent of apartment structure starts were low-rise buildings, at a height of three stories or less.”

The fundamentals are in place for continued construction of homes for ownership and rental in the Calgary region.

The economy is on a positive upswing, jobs are being created in the region, the population is growing both naturally and through immigration and migration from other provinces.

And more homes are needed to meet that growing demand today and in the future in Calgary.

Chris Chornohos has a passion for real estate and helping his clients reach their business goals by providing Real Estate Investors and Owners with the first class valuation and advisory services to close more deals. Chris is also an investor, builder and developer. Reach out to Chris today to help with your Real Estate needs. 

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Chris Chornohos is a leading real estate consultant, investor and developer with extensive experience within the commercial real estate industry. Contact me today.

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