According to the Calgary Real Estate Board’s (CREB) Economic & Housing Outlook Mid-Year Update, the housing market had a slower than expected recovery in 2018.
While Alberta had the fastest growing economy in Canada in 2017 — that included an increase in employment rates and a growing population as the number of people moving into the province rose — there were still several factors that kept the housing market from improving. The biggest hurdles were:
- Securing a mortgage is now harder due to stricter lending conditions and higher interest rates.
- The economy has yet to reach pre-recession levels of activity.
- Job growth is moving away from traditional sectors.
- An excess in housing supply left over after two years of recession.
Stricter lending conditions and higher rates have made it harder for households to afford a new home. The Bank of Canada raised their overnight rate from 1.25% to 1.50% in July, marking the fourth increase this year. It’s expected they will increase it again later this year in order to remove the interest rate stimulus from the market.
Despite this headwind, it’s expected that Calgary’s economy will continue to gain ground during the second half of 2018, and help reduce some of the oversupply issues. However, the economic increases haven’t been substantial enough to offset the sluggish real estate activity in the first half of 2018. As a result, it’s expected that there will be price decreases of around 1.17% across Calgary’s housing market, with the condo apartment sector experiencing a decrease of around 2.5%, and detached homes experiencing a decrease of around 1%.
While Calgary’s energy-based jobs have seen signs of improvement in recent months, they haven’t recovered as quickly as economists predicted. After many years of cost-cutting measures, several energy companies gained a better position to stay profitable even at lower energy prices. However, that increase in profitability hasn’t translated into job creation. Calgary’s unemployment rate remains at 7.9% as of July 2018, which is high compared to historical standards.
On the plus side, after several years of a net negative in inter-provincial migration, people are starting to move into Calgary. The city saw a population growth of 1.69% on a year-over-year basis. This increase in population should have a small effect in overall housing demand, though not nearly enough to put it into the positive.
The overall result, then, is that real estate analysts are predicting a much slower 2018 for Calgary’s housing market, which should translate into minor price declines in a relatively stable marketplace.