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Slowing demand affects developers
Multi-family housing pace to decline
By Marty Hope, Calgary Herald

For Calgary’s multi-family housing industry, 2009 will likely be a year in which developers clean up what’s on their plates before asking for a second helping, says a federal agency.

Coming off 2008, when construction started on 7,051 townhouses, apartments and duplexes -- the highest total in more than 30 years -- the forecast for this year is for about 1,700 units, says Canada Mortgage and Housing Corp.

The industry recognized the slowdown was coming partway through last year, when demand began to slow in the wake of rising prices and an escalation of available inventory in both the new and resale sectors, says senior market analyst Lai Sing Louie of CMHC.

"As a result, much of the multifamily construction activity in 2009 will focus on completing the multitude of projects that were started in 2007 and 2008, rather than initiating new construction," he says.

In terms of total housing construction starts -- both single-and multi-family homes -- last month’s total of 243 made it the weakest January in 18 years.

In 1991, 158 single-detached homes and 12 multi-family units were started.

The various factors affecting the housing industry and the economy could mean some projects in Calgary’s inner-city Beltline area may never be built, says Paul Battistella, president of Battistella Developments.

The company is in the homestretch of its Colours by Battistella highrise at First Street and 15th Avenue S. W.

Battistella suggests that if underground parkades are under construction, they could be capped until such time as the construction climate improves and buyers find their way back to the marketplace.

"If the project is not out of the ground right now, it’s not going to come out of the ground in the near future," he says.

In January, multi-family construction starts totalled 39 units, down from 120 in December 2008 and 348 in January 2008.

"Multi-family starts have been moving lower since June of last year, while inventory levels have been moving up," says Louie following the release of CMHC’s January activity report.

Demand is being reined in by consumers, he says. "The issue is in terms of people being uncertain about the economy and about making a major purchasing decision."

In terms of single-detached housing, work started on 204 homes last month, about 44-per-cent below the 363 started in January 2008 and 79 fewer than this December.

"The downward trend in single-detached starts seen during 2008 is expected to continue into 2009 due to the current economic uncertainty and elevated levels of inventory in the market," says Louie.

Builders expected a decline in activity after three straight years of strong growth, but few thought the correction would be this deep -- about half the activity recorded in 2008 and about two-thirds off the 2006 peak, says Jay Westman, president and CEO of Jayman MasterBuilt.

"Builders are motivated to sell off excess inventory and will either write down or sell homes at cost for the next six months," said Westman in an earlier interview.

Total housing starts across Alberta’s seven largest centres declined to 836 units last month, down from 2,185 a year ago.

The Wood Buffalo region, which includes the oilsands-fuelled city of Fort McMurray, was the only centre to report an increase, rising 12.3 per cent compared to the same month last year.