Calgary home prices will fall in 2019 due to weak oil prices, unemployment: report
New reports from two of Canada’s largest real estate brokerages suggest 2019 will be another tough year for Calgary’s residential real estate market.
In its annual market survey forecast released Tuesday, Royal LePage predicts the median home price in Calgary will fall 2.3 per cent to $473,104 by the end of 2019. A separate report released by Re/Max says Calgary’s average residential sale price will remain flat in 2019, at $487,399. Both reports blame low consumer confidence due to persistently weak oil prices for the lack of growth, as well as new mortgage regulations that are negatively impacting sales.
“The challenge has been that we were just coming out of a recession at the end of 2017 and then of course we were impacted by the new mortgage stress rules, along with the rise in interest rates. Those things really had buyers take a step back,” said Corinne Lyall, broker and owner of Royal LePage Benchmark in Calgary.
So far in 2018, overall sales activity in the Calgary market is down 14 per cent compared to 2017 and nearly 20 per cent below long-term average levels. Year-to-date sales have slowed across all price ranges, except product priced below $200,000, which now represents nearly six per cent of all sales. The largest decline in sales has occurred in the $600,000 to $999,999 range, according to the Calgary Real Estate Board.
While CREB will not release its own 2019 forecast until January, chief economist Ann-Marie Lurie said the city’s unemployment rate — which remains high at 7.9 per cent — is worrisome.
“Even this year, employment was supposed to be getting better and we just haven’t seen it,” Lurie said. “Currently most indications are pointing to things not necessarily changing. And obviously that has implications for our housing market.”
There are positive trends in the market — the City of Calgary’s most recent census showed the overall housing vacancy rate decline to 3.86 per cent in 2018, a decline from a peak of 4.76 per cent in 2017, which was the highest vacancy rate in nearly 20 years. The census also reported Calgary is once again attracting new residents, posting positive net migration of 11,588 compared to a net migration of 974 in 2017 and an out-migration of 6,500 people in 2016.
However, Lurie said the level of sales activity in the market currently is lower than it has been since the mid-90s. And the detached home category, which had shown some signs of recovery in 2017, is on a downward trend once again. In November, the detached benchmark price was $486,000, a three-per-cent decline from last year and nearly seven per cent below the high recorded in October 2014.
“We started to see some gains last year in the detached pricing, and we have given up those gains,” Lurie said.
Both the Royal LePage and Re/Max reports suggest Calgary will not see notable price gains in its real estate market until full-time employment rates increase, though Re/Max suggests a positive announcement on the Trans Mountain pipeline could significantly impact buyer confidence in the short-term.
“Calgary’s market may shift at a moment’s notice as it is so closely tied to its dependency on the oil and gas industry,” the report says. “Depending on what happens with the pipeline in 2019, the outlook for 2020 could shift dramatically.”