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Is a housing overbuild forming?

Is a housing overbuild forming?

Posted on: 4/30/2018 | Author: ATB Financial's Economics + Research Team

​​An increasing number of new houses are sitting vacant in Alberta’s major cities suggesting that an overbuild of new housing is forming in the province.

In Calgary for example, the number of completed but unabsorbed homes has now reached levels last experienced during the 2009 recession. As of March of this year, 689 new homes sat vacant with no binding agreement made to buy or sell. Vacant housing in Calgary was nine per cent higher than during the same month a year earlier and has been on the rise annually for about three years.

The level of new housing inventory is increasing in Alberta’s capital city, too. In March, the number of unabsorbed homes reached 1,251 in Edmonton. This number was 23 per cent higher than March of 2017 and only ten per cent less than when the number of vacant homes reached its peak in the spring of 2016.

Looking at the unabsorbed inventory of new homes is one indicator that suggests an overbuild is forming. Other indicators like building permits suggest that a potential glut of new housing in the province is likely. Intentions for residential construction have yet to waver despite higher inventory of vacant, new homes, lower levels of provincial in-migration and the new mortgage changes that took effect at the beginning of this year.

It’s only a matter of time before homebuilders begin to react to the economic conditions. For now, it appears as though an overbuild is forming.

Unabsorbed inventory, graph

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