Home-building boom expected for Fort McMurray, Alta., after fires, CMHC says
Home-building boom expected for Fort McMurray, Alta., after fires, CMHC says
21 July 2016
published by https://www.localxpress.ca
Canada CALGARY A home-building boom in wildfire-ravaged Fort McMurray, Alta., is expected to start later this year and expand in 2017, the likes of which haven’t been seen in 20 years, Canada Mortgage and Housing Corp. said Thursday.
The federal housing agency released a report that looked into the community’s housing market following the fire that erupted in May and destroyed 2,000 structures.
Tim Gensey, a market analyst for CMHC, said the report was based in part on what happened after a fire took out more than 500 homes and buildings in Slave Lake, Alta., in 2011.
The report said if all the single- and multi-family homes destroyed by the fire in May were rebuilt in one year, along with the usual number of new homes, it would result in about 2,500 housing starts greater than the previous record of 2,200 starts in 2007.
But Gensey said it’s unlikely housing starts for destroyed homes in Fort McMurray can begin this year because of the extensive cleanup that must take place first.
“We did note that most of the reconstruction permits were received within 14 months of re-entry into Slave Lake and construction obviously took place after that, so we will probably expect a timeline that’s similar to that (in Fort McMurray),” he said.
“A large amount of the housing stock has unfortunately been lost to the fire but there are still some fundamentals that we think will guide the market in the medium term.”
Jim Rivait, CEO of the Alberta branch of the Canadian Home Builders’ Association, said it typically takes six to nine months to build a house and it will likely take two to three years to finishing rebuilding Fort McMurray’s homes.
He pointed out that many decisions have yet to be made by the municipality, including when and whether it will allow reconstruction of homes in certain areas that may have environmental problems. Insurance settlement processes will also likely delay housing starts.
“There will be some built (this year). Certainly not 2,500,” Rivait said.
“A healthy market up there was building 1,000 homes a year. I think they may have some local capacity for 500 or 600 right now so there’s going to have to be help from outside.”
He said some neighbourhoods are so extensively damaged that the process of rebuilding them will be akin to setting up new subdivisions. Rebuilding will have to be staged so that builders aren’t “tripping over each other,” he said.
Although most of the damage in Fort McMurray affected residential areas, some businesses are included in the Regional Municipality of Wood Buffalo’s count of 1,928 structures destroyed. About 80,000 people in the region were forced from their homes in early May and most were not allowed to return until a month later.
The anticipated building boom would follow a housing bust linked to low oil prices. Home construction in Fort McMurray had fallen to a near 20-year low before the fire, and only 74 combined single- and multi-family units started construction in 2015, the lowest level since 1997, CMHC said. The pace this year was equally weak at only 13 starts.
Additionally, CMHC noted that only 155 sales of existing homes took place in the first quarter of this year, continuing a downward trend that began in 2014. The average home price fell to $504,000, compared with an average of about $609,000 two years earlier.
In its report, the agency forecasts housing prices will halt their declines but didn’t make a price prediction. It said it’s unclear how many listed homes for resale will return to the market after repairs are made, noting many listings expired because the homes had been evacuated.
But prices will be supported, CMHC said, as some displaced residents opt to purchase existing homes, driving up demand.
Rental vacancy rates that hit 29 per cent in October are expected to decline rapidly, helping stabilize rents that been falling, CMHC said.
