Easy does it: Calgary real estate market settling into the new normal , says CREB
|calgaryherald.com 14 Jan 2020 at 17:24|
Six years after the oil price crash, Calgary’s real estate market is slowly moving towards more balanced conditions, said CREB chief economist Ann-Marie Lurie at the organization’s annual forecast event. However, detached home prices remain nearly eight per cent lower than 2014 highs and the days of buying a house and selling it for a tidy profit five years later aren’t coming back anytime soon.
“It’s not going to be like what we had prior to 2014,” Lurie told reporters. “We’re moving into slower, more normal conditions. When you compare it to other markets across the country, we’re looking a lot more like them.”
According to CREB, overall sales activity in 2020 is expected to improve by two per cent over 2019. That combined with easing inventories should help slow the pace of decline in the average benchmark price for a home to just 0.5 per cent in 2020 (versus the larger-than-expected 3.3 per cent decline in the benchmark price that occurred in 2019).
Driving the stabilization is the improvement at the lower end of the Calgary real estate market, Lurie said. In 2019, sales growth in the under $500,000 market grew by seven per cent, while resale sales for the over $500,000 segment declined by nine per cent. The most affordable areas of the city — such as the northeast, southeast and far north — saw the least amount of price decline in 2019 while the more expensive areas, particularly the city centre, saw the steepest drops in price.
While improving conditions in the lower end of a market can eventually spill into the upper end of the market, this is not expected to occur over the next year, Lurie said. Part of the problem is that while the city’s unemployment rate has improved from 2016, it is still high (6.9 per cent in November) compared to historic norms. The employment situation isn’t expected to improve significantly in 2020, and most of the gains that have been made so far have been made in education and health care, not in the higher paid scientific and technical occupations.
“We don’t have the same type of job growth in those higher paid sort of salaries that we’ve seen historically, so for that reason alone it will take a lot longer to see those improvements filter through the higher end of the market,” Lurie said.
Lurie said there are risks that could threaten CREB’s 2020 forecast. If recent job losses in the Calgary market continue into 2020, it will impact consumer confidence and housing market activity.
In addition, if new-home construction projects exceed anticipated demand growth, this will slow the downward adjustment in overall housing supply and impact price stabilization. According to the Canada Mortgage and Housing Corporation, there were 3,101 housing starts in Alberta in December 2019 — a 117-per-cent increase from December 2018.
Still, CREB CEO Alan Tennant said evidence of market stabilization is a reason for optimism, and added he believes “the new normal” is nothing to be afraid of.
“Normal may not be sexy and fun, but there’s still a lot of business to be done there,” Tennant said. “That’s the start of maybe the dominoes starting to fall in the right direction.”