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Housing starts for single-family detached homes in Calgary declined in the first quarter of 2023 after setting a record last year

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The number of detached housing starts in Calgary dropped by 16 per cent during the first quarter of 2023, according Canada Mortgage and Housing Corp. statistics.Jonathan Ferguson/Handout

Housing starts for detached homes in Calgary declined in the most recent quarter, at a time of when a growing gap between supply and demand in the single-family segment is driving an increasingly tight market.

The number of detached housing starts dropped by 16 per cent during the first quarter of 2023, reflecting a broader trend across the country, according to statistics from the Canada Mortgage and Housing Corp.

At the same time, nearly 8,000 people have relocated to Calgary – 27 per cent more than in the first quarter of 2022, which was a year of record population growth. The average price of a detached home in Calgary was about $730,000 in May, according to Calgary’s real estate board, up 11 per cent from a year earlier.

A BMO report released in May noted that a greater percentage of new home construction is now made up of the condo market. The report said detached homes are more responsive to rapid fluctuations in demand than apartment towers, because they are built more quickly.

While the average length of construction for single-family homes in Calgary is just over 9 months, apartments can take twice as long. As the number of units under construction in the city reached a new high in April, only 20 per cent of them were single-family homes.

“Right now, we’re in a bit of an oversupply situation,” says Edward Jegg, a research manager of data solutions at Altus Group, referring to new single-detached builds. “It seems that, over the last year, as sales have been falling back slowly, builders have still been bringing product to the market.”

Last year, nearly 5,000 detached homes were completed in Calgary, which was the highest number since 2015. While only 426 units have reached completion so far this year, there are roughly 3,900 units currently under construction.

As the detached inventory in the resale market continues to falter, down more than 40 per cent in May from a year earlier, sales in the new-build market are slowly increasing. With 532 sales, April recorded the highest number of single-family homes sold in the new-build market since November, 2021, according to the Altus Group data.

The number of sales of detached homes in the resale market decreased by 8 per cent year-over-year, despite the significant drop in inventory.

“New housing is always going to be more expensive than a resale,” Mr. Jegg explains. “Which is why typically the resale market picks up a little bit earlier – because prices are lower.”

But the gap is closing between the resale and new-build markets. According to Altus Group data, the average selling price of a newly built, single-family home in April was $768,500, compared with $691,000 that month for resales.

Another issue is that the capacity of developers and home builders to maintain their output is being undermined by a labour shortage. The Calgary Construction Association estimated in January that there were between 3,000 and 4,000 unfulfilled job vacancies in this city’s construction industry.

Michael Ferreira, a senior vice-president at Anthem Properties, a Vancouver-based developer that is becoming a major player in Calgary, said his company plans to bring about 1,100 lots to the Calgary market this year, but he said the pace is still unable to meet the city’s demand. The number of lots serviced determines how many homes can be constructed in a given year, either by developers themselves or in partnership with home builders.

“There is demand for more lots to be brought on and for more homes to be built,” he says. “But the market just doesn’t have the labour capacity to build more than they’re actually building.”

To address this, BILD Calgary members are working with the Calgary Board of Education and SAIT to increase the number of young Calgarians and women who choose to pursue educational opportunities in the trades. Moreover, the organization is supportive of immigration policies that attract more workers experienced in construction to the city, said Brian Hahn, CEO of BILD Calgary.

While labour is the most significant barrier to increasing supply, Chris Richer, a senior vice-president at Brookfield Residential, said the city needs to speed up approvals to clear the way for more construction

“Municipalities play an incredibly important role in terms of making sure that we’re building great, long-lasting housing that builds into a more comprehensive plan in a city,” Mr. Richer says.

The City of Calgary insists that there has been progress in reducing approval times. The city pointed to a report from the Canadian Home Builders’ Association released earlier this year

Mr. Hahn of BILD Calgary said demand is unlikely to ease this year in the face of population growth and a real estate market that remains comparatively affordable. For example, the average benchmark price for a single-family home in Calgary remains roughly $633,000 lower than a similar property in Vancouver.

“The numbers right now say that we hold a very attractive place relative to other major Canadian cities,” said Mr. Hahn.

“Supply is the key to unlocking affordability.”

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