It might be a blip in the radar, it might be a prelude to what might happen with Calgary's economy in 2015, but housing starts in the city took a huge drop in January. New home construction fell 43.8% in January, to 747 units, according to the Canada Mortgage & Housing Corp. By way of comparison, in January 2014, there were 1,328 housing starts.
Now the pundits will argue this is a result of low oil prices, but it could be the impact of the city's policy to stop growing outward and grow upward in terms of new housing growth. However the multi-family sector also dropped, by 50.7% to 430 units. Startups of single-family homes also declined last month, dropping 29.7 to 317 units from 451 in January 2014, so it could be something more than city policy.
The optimists will argue less housing starts means less inventory for the Calgary market, which will keep home values higher in the long run. Not to mention there is already more inventory in the market with 37% more listings added in January.
Generally housing starts are a measuring stick for the rest of the economy as they bring about a domino effect with other businesses from contractors to retailers to wholesalers.
Economists are calling for a big slowdown in Alberta's economic growth with real GDP growth at 0.6 this year, down from 2.7 that was predicted by RBC in December. Last year, GDP growth was 4.1 percent. However, one RBC report indicates oil prices could rebound by the middle of this year, thus helping Alberta avoid a recession.
Interestingly, housing starts across the province were up in January, increasing by 27.7% to 44,800 (the annualized rate), which was higher than the 12-month trend. However, experts expect the number of housing starts in Alberta to decrease in the coming months.
Layoffs have been announced by many oil and gas companies to the tune of 13,000 jobs lost in the natural resources sector, according to Statistics Canada. Halliburton, Sanjel Corp, Baker Hughes, Schlumberger and Weatherford International PLC have all announced layoffs in the thousands across North America and internationally.
The price of oil has been down since July 2014, when it was valued at US$105 per barrel for West Texas Intermediate. In the first week of February 2015, the price was around US$50.
So far the good news economic experts are predicting the second half of 2015 will see oil rebound, coupled with the creation of more jobs and economic growth.
Ryan MacDonald, B.Sc. Real Estate Professional
Million Dollar Club Member
Top 1% Real Estate Professional in Calgary
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