The simplest prediction is volatility and continued craziness. If that is the prediction I make, given my horrible prediction success ratio, perhaps we will actually have a boring, steady construction season. I’d take that. Instead here are some more detailed picks;
City of Calgary attempts at modernization of itself make little headway - a continued disconnect between the left hand and right hand characterizes city hall. The left hand contains ‘leftist’ ideas, and lots of politically correct woke policies, where the planning department staff tend to reside. The right hand contains ‘conservative’ ideas, which means nothing is allowed to happen because the bylaws are rigid, and any change that does occur is grudgingly incremental and drags on for the better part of a decade. The barely concealed classism and other ‘ism’s’ of the premium R1 communities live on the right and focus on political influence. The builders live in the real world where residing in the left or right has no utility. Instead the builder assesses risk and makes snap investment decisions and ultimately is accountable to the marketplace, policies be damned (actually never even read by any builder because builders don’t care for policy), work must get done.
Infill housing market - I am forecasting a modest price (mid single digit) increase for 2022, largely below real inflation and impacted by inescapable factors. The first and of utmost importance is the assumption that the builders spent 2021 building out and burning up the cheaper land purchased in 2020 when the market was in rough shape. Builds starting in spring 2022 are significantly ratcheted upward in cost base due to land value. Over the past year I have highlighted numerous crazy land ‘deals’, in heavy quotation marks, where I felt the math was really suspect (suspect meaning awful, hideous, or grotesque). Someone now needs to put this dirt to work unless they enjoy cashflow negative alligators, and holding costs. If the builder paid $100k extra vs what I thought was rational for an r2 lot, then each of the new builds must be $50k more just to cover the purchase price, and that does not address the cost of capital for the land deal money, which is unknown, but surely more than zero. Enough posts on this site have referred to commodity and supply chain issues. These are real concerns but just because the poor builder pays double for lumber that arrives a month late, it doesn’t translate into market price changes for the infill product. Unfortunately. Eventually these input costs will result in less supply and that could drive up infill prices, but as soon as that happens the liberal government will ask its friends at the bank to raise interest rates.
labour is the bottleneck for 2022 - there is simply too much demand and the Calgary labour marketplace is unable to tap new willing workers. The type of work needed is from those in the trenches doing the heavy lifting, bringing impressive skills and muscle to the table. Maybe the construction worker zeitgeist is unhappy with the lockdowns, public sector enriching itself while hardly working at home, and inflation of necessities for living, and have tapped out.
I will focus again on rental construction - I believe there is no greater contribution I can make than turning a decrepit shack into premium housing, purposefully designed and executed for the rental market. My rentals will contribute to the lifestyle of four lucky households and enrich the community. My related prediction is the planning department will work with me to expedite the permits needed to allow me to really get going on the pre-construction services I conduct for every confirmed project. This is the phase of the project where a decade of experience and connections is leveraged into launching the most efficient, scheduled and budget friendly build possible, where every decision is vetted and second guessed, and the wheels of the trades mobilized to build out the dream.
So there is a quick list of predictions for 2022. See you in December…
This is Prince Charles Martin. He made a valiant attempt to upset King Kong Ortiz, but was bludgeoned by a vicious left hand and got stuck in the ropes and counter out. This image is a metaphor of building houses today, but instead of the match getting stopped by the referee, the builders get bludgeoned routinely by the market and must be resilient to start over again on Monday morning.