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What you need to know about COVID-19: August 4, 2020
Edmonton and Calgary have been singled out as having higher risks of longer housing market turnarounds than other Canadian cities.
Canada Mortgage and Housing Corporation’s (CMHC) Housing Market Outlook – Special Edition (HMO), says the Alberta cities have suffered a double whammy with COVID-19 and the uncertainty of the energy industry.
The report is based on best- and worst-case predictions of starts, sales and prices between 2020 and 2022, indicating uncertainties about the timing of recovery, says Aled ab Iorwerth, CMHC’s deputy chief economist.
“The HMO incorporates a wider range for housing indicators than we normally publish, reflecting the heightened risks and uncertainties of the current context,” says ab Iorwerth. “The upper bound depicts a more optimistic scenario while the lower bound shows a more protracted downturn in the economy and housing market.”
In Edmonton, the uncertainty of CMHC’s report shows in the predicted range of average price declines over the forecast period.
“Due to the uncertainties around oil prices and trajectory of the regional economy, average home prices are estimated to continue to decrease until 2022,” says Christian Arkilley, senior analyst, CMHC Economics. “As restrictions are eased, paving the way for population growth and labour market improvements, home prices are projected to begin gradually picking up in 2022; however, prices are not expected to be back to pre-COVID-19 levels within the forecast period.”
CMHC forecasts the average selling price in 2020 will be between $316,700 and $353,600; from $276,000 to $336,700 in 2021 and between $270,900 and $325,500 in 2022.
The double whammy combined with low population growth and high inventories will slow residential construction, says Arkilley.
“Edmonton’s housing starts are projected to decline in 2020 before gradually increasing in 2021. The pandemic and oil price shock will have a negative impact on Edmonton’s economy, as the CMA relies heavily on the oil industry as a major source of employment,” he says. “In addition, new construction will also be impacted by the elevated inventory of completed and unsold homes, which reached historically high levels in 2019 and accounts for more than half of all unsold homes in Alberta. Reduced migration inflows as a result of the pandemic could also affect population growth and contribute to a short-term decrease in housing starts in Edmonton in 2020.”
CMHC expects construction to drop in the range of between 4,020 and 6,400 starts in 2020. In 2021, the range is 6,115 to 9,075 and 7,630 to 10,590 starts in 2022.
A nine-month decline in MLS activity is predicted to continue.
“Since the third quarter of 2019, sales have been declining and are expected to continue this path until mid-2021,” says Arkilley. “The economic impact is anticipated to restrain job growth and limit consumer spending, causing housing demand to move lower.”
Predicted sales range from 13,380 to 16,550 in 2020; between 10,760 and 16,040 in 2021 and. 171,550 to 16,970 in 2022.
Copyright Postmedia Network Inc., 2020