Construction begins to pick up in Calgary, with a steady increase in Edmonton

Rental markets are beginning to tighten.

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Calgary led the top hubs in Canada for new home starts in June, buoyed by development in the multifamily sector and a strengthening economic outlook.

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“Overall, the starts were pretty strong and we haven’t seen this build in a long time,” says Michael Mak, senior market analyst for Calgary at Canada Mortgage and Housing Corp.

The crown corporation released its latest data this month showing Canadian starts remained strong in June despite rising interest rates and falling prices in major markets for resale.

Overall, starts were flat in Canada for the month compared to the same period last year at around 23,600, but by historical measures, activity remains elevated, according to a CMHC press release.

Calgary stood out among the largest cities in Canada. June starts are up 60 percent year over year with 1,883 units under construction. That edged out Toronto in second place with a 36 percent increase (4,246 units) and Ottawa, which saw an 18 percent increase (897 units).

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Starts in Edmonton (1,107) were up five percent year over year, while other major cities saw declines in new construction.

Multifamily housing in Calgary saw the biggest jump in activity with 1,332 starts compared to 635 last year. Of those, 78 were townhouses and 117 were semi-detached houses, slightly fewer. Apartment starts made up the majority of multi-family starts.

While nearly 80 percent of all Calgary startups were for ownership, a significant number were for purpose-built rentals. In all, 22 percent of all starts in June were rental units.

“Basically, developers are seeing things change rapidly and there is a lot of demand right now in Calgary compared to previous cycles,” says Mak.

“Vacancy rates are lower than what we reported last year and rents are higher.”

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Zonda Urban analyst Kendall Brown says 10 rental projects were launched in Calgary from April to the end of June Calgary, adding 1,618 new units to the market.

“Despite all the new products, we still see a downward trend in vacancies,” she says.

Also, rental rates continue to rise. In fact, rents have reached their highest levels on record since Zonda Urban began tracking the market, it further notes.

“Average rental rates at the end of the second quarter were $2.42 per square foot,” a 6.4 percent jump from the first three months of this year.

“Interest in the Calgary rental market is coming primarily from professionals in their 30s and 40s, and from homeowners who have sold their homes in the past few months and hope to buy until prices come down,” adds Brown.

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Despite rising interest rates and home prices, demand for new detached single-family homes remained strong in June, CMHC figures show.

Starts were up, albeit modestly from the same month last year, up two percent with 551 starts. The figure is lower than that of Edmonton, which saw 765 detached single-family home starts last month, but “there’s still a lot of demand, although it’s slowed down a bit due to rising interest rates,” says Mak.

“A few months ago, those waiting lists for new homes were basically full.”

The median price of a new single-family home rose to about $707,000 in June, up from $680,000 the previous month, an increase of about three percent.

Year-to-date, single-family housing starts are up about 18 percent over the same period in 2021, CMHC figures reveal.

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Mak adds that higher costs could further dampen single-family starts.

“Higher interest rates are sure to put pressure on the market, including the way projects are financed.”

Costs are also rising for construction with the Statistics Canada Construction Price Index up 30 per cent for Calgary from the previous year.

“That’s pretty significant and could affect home prices in the future,” says Mak.

However, Calgary’s economic recovery, fueled by higher oil and gas prices, should attract more migration to the city, serving as a counterweight to downward pressure from rising prices and interest rates in the city. demand.

“Calgary’s unemployment is down beyond 2019 levels, so it’s experiencing a full recovery from the pandemic and then some,” says Mak.

“In the long term, we look forward to supporting continued strong construction activity.”

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