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HOUSING MARKET DOWNTURN HAS RIPPLE EFFECT IN CALGARY

Housing market downturn has ripple effect in Calgary economy


 

The ripple effect of a slumping real estate industry, combined with plunging oil prices, is already starting to be felt by businesses throughout Calgary.

“We’ve definitely seen an impact,” said Dell Lloyd, owner of Omega 2000 Cribbing Inc., in Calgary, which does foundation work for several large home builders. “I’m guessing this year our starts will be down probably about 15 per cent.

“That’s in a way a nice thing because it’s going to take the stress away from us on the labour side. For the last five years, we could never seem to hire enough people to do the work that was asked for.”

Lloyd said he hasn’t had to lay off any workers.

“I’m guessing June is going to be the true telling month of what’s going to transpire for the rest of the year,” he said.

Carey Bracko, owner of the Bracko Brothers home furnishing store in Calgary, said that in the economic downturn of 2009 the company didn’t see a sales decline, but profits did drop.

“Right away, you start trying to find ways to save on the expense side,” he said. “Control the things you can control. You can only reduce your expenses a certain amount so you don’t affect your staff. You want to keep your staff going at a right direction.

“When somebody buys a house, what goes through their veins? Excitement. Joy. A lot of times that transforms into buying new stuff or changing stuff within the house. It’s just part of the package.”

Housing starts in the Calgary area were down 43.8 per cent in January from a year ago, according to Canada Mortgage and Housing Corp. The multi-family sector was off by 50.7 per cent while the single-detached category dropped by 29.7 per cent.

According to the Calgary Real Estate Board, year-to-date MLS sales in the city up to and including Monday, have decreased by 39.1 per cent compared with the same period last year — falling from 1,929 transactions to 1,175.

According to the Canadian Home Builders’ Association-Calgary region, a report in 2013 indicated that 42,600 jobs were related to new home construction, renovation and related fields in the city and those jobs generated $2.7 billion in wages that show up in purchases across the entire local economy.

Wayne Copeland, president of the local home builders’ group, said 2014 was an “unbelievable” year with a record pace of new home construction and 2015 will still be a “decent” year for the industry.

“Our members — builders, suppliers, developers — all understand that 2014 was an anomaly. They have taken the steps needed to understand that there will be a decrease in activity for 2015 and 2016,” he said.

“When we talk about the trickle down effect, there will be some. I have not heard of any layoffs in the homebuilding industry yet. I have not heard any downsizing. We are as busy as we’ve been still. So if there’s any trickle down effect that probably won’t happen for a couple of months yet. There’s still some pent-up demand. There’s still some sales that are being pushed through from a couple of months ago.”

In 2013, a report prepared by Altus Group Economic Consulting for the Canadian Real Estate Association found that in the period between 2010 and 2012 an estimated $49,625 in ancillary spending — on items other than the actual house and land — was generated by the average housing transaction in Canada.

It also said an average of 176,420 direct and indirect jobs were generated annually by home sales and purchases through MLS.

Dave Smith, president of the Calgary Construction Association, said there appears to be a slight decline in building permits for the residential sector which is not uncommon for the months of January and February.

“However, we do recognize with oil prices where they are — roughly half of what they were six, seven months ago — that there will be an impact. Nothing unusual however as Albertans are used to this roller-coaster ride with the changing of our economy over time,” he said. “So we’re fairly confident that the market will turn around here very shortly and that construction will continue on at a healthy pace. However the contractors are prepared should this trend continue for some months. What it will mean is a more efficient workforce in the construction industry.

“The construction industry is still in need of skilled tradespeople as we’re looking at about 320,000 Canadians who will be needed in the construction/institutional commercial construction sector over the next five years.”

mtoneguzzi@calgaryherald.com