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Calgary Housing Market and Update
The Corona Virus has taken a big toll on the Calgary Housing Market, but the forecast is for better sales with a moderate price growth.
The current recession has obliterated previously carefully crafted forecasts on the Calgary real estate market and the economy in Calgary and Edmonton. But if we wait until 2021, with a virus vaccine, we could see these forecasts, including CREB’s Dec 31st forecast gain credibility again.
Most activity last year was in the under $500,000 price market whereas luxury homes suffered. Now with lower mortgage rates, business reopening, and the energy industry revived, the full real estate market in Calgary should see growth in the rest in 2020.
The June stats show prices well up but new listings down a little. See stats chart below.
A few Realtors feel the Calgary house and condo market is far from normal as the buyers shift to buy lower priced homes. And inventory is more than sufficient to supply the reduced numbers of homebuyers.
In May, home sales declined 43.6% year over year while listings dropped 22.3% and new listings fell 29% year over year.
Average home prices dropped 7.45% while days on market grew by 4 days to 60. The highest price declines occurred in Calgary City Centre, West, North West and North East districts.
Year to date stats are down too. Total home sales have dropped 23% while average price is down 3.4% compared to 2019.
Calgary Single Detached Home Stats May
In May, total house sales dropped a whopping 43% year over year, while average prices dropped by 7.4% to $515,831. Pending sales are down 30.8% compared to last year.
Sales of condo apartments plummeted 56.6% YoY but rose slightly from April. Average apartment condo prices fell almost 12% and there were only 6 pending sales at the end of May. Most of the apartments purchased were in the under $200,000 range. It’s likely the Corona Virus is killing interest in condos and apartments.
“The initial shock of COVID-19 and social distancing measure is starting to ease. This is bringing some buyers and sellers back to the market. However, this market continues to remain far from normal and prices are trending down,” said CREB® chief economist Ann-Marie Lurie.
Attached home sales slowed by 35% in May compared to last year for a total of 273 units. Inventory levels fell to 1,503 units which is a very high 5.5 months of supply.
The economic challenges and risks continue in Calgary and this should moderate home sales for the rest of 2020. Buyers are likely not sure of their economic future. There are a host of economic worries right across Canada and in US Canada trade deals.
Of course, the fundamentals driving home sales now are unemployment and the subdued consumer earnings due to the Corona Virus, shutdown.
The Vancouver housing market, Kelowna Vernon housing market, and Toronto Housing market are in the same spot. However the rising price of oil, if it continues is a big break for Alberta. The development of the TransCanada pipeline could be an additional boost for the Western economy.
Sales activity in Airdrie, Cochrane fell with prices rising, and in Okotoks, prices fell while sales improved.
Superb Opportunity for Long Term Investors
For buyers and investors, the bottomed out Calgary housing market still represents a buying opportunity. The Canadian economy is insecure and no one is certain about oil and gas prices. Of recent, the oil price forecast is stable and positive varying between supply and demand factors. Although OPEC has tried to muscle prices higher President Trump has managed to ensure they don’t undermine US economic growth.
Oil trapped in Alberta will be a persistent problem for some time and that might make this a great time to find the home you want and buy while mortgage rates are low.
Forecast for the Calgary Real Estate Market
Oil Price Discount Hurting Alberta
The WCS discount isn’t a problem anymore and the oil pipelines are looking like they’re more likely going to happen (President Trump). The BC transmountain pipeline is hampered by the fact the BC Premier is entrenched in a pride position and likely won’t let the pipeline happen. Gas prices in Vancouver however are climbing to ridiculous heights and Vancouver’s own housing market is hurting bad. Something will have to happen.
Oil production in Alberta is growing, however profit isn’t rising as much as people believe as this chart below reveals. The net effect is that there is growing revenue and it will lead to more activity in the Calgary housing market.
This forecast below from CREB doesn’t take into account the resurgence of the Alberta economy. With price stability, and a booming US economy, the picture for Calgary looks rosy.
Oil Prices and OPEC
Currently the US has applied an embargo on Iranian oil, however they issued passes for some nations, which means Iran oil gets to flow.
OPEC is driving prices especially with Iranian supply out of the picture. And there’s no reason why US shale oil producers would want to plummet the price anymore than Alberta Tar Sand producers would.
Does oil have a future in the overhyped world of green energy and high tech?
The Turnaround in Calgary Canada is Coming
The growth in the US oil wealth is obvious with Texas post hurricane development. And western shale oil producers are ramping up oil production which means they feel positive about demand and price. If the democrats gain increasing power, that could darken the picture for Alberta. They stopped pipelines before and would do again for powerful lobby groups in Washington.
Where were the hot properties in Calgary in May 2018? It had to be semi-detached homes in the east, northeast and east districts (+6% to 10% YoY).
Recent improvements: Unemployment has dropped in the last 2 years and many believe the recovery is well underway — powered up by rising oil prices in US dollars x rising production numbers. Calgary’s economic growth lead Canada at 6.9% and that’s when oil prices were lower.
The Conference Board of Canada predicted Calgary will lead the nation at 2.4% growth in 2019 however given recent developments, it’s unlikely. If Alberta oil is shut in, the CAD loonie should stay low. Some are still predicting a 70 cent loonie by the end of 2019. Toronto, Vancouver and Montreal are doing well, but not enough to raise the loonie.
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OPEC Was Willing to Throttle Output to Raise Oil Prices
Yes, Calgary is more than oil, but oil money is hard to ignore. Alberta needs the investment funds that flow in when Oil prices rise.
With OPEC cutting oil production output, and oil prices jumped past $71 a barrel (WTI) it awakened the oil patch. Since then investment money is almost non-existent. Alberta can’t get its product to market and surrounding neighbors won’t let its products across their borders.
Some are still forecasting very high oil prices, yet Alberta may not get to enjoy the bounty until 2020. If prices fall, less political pressure and effort by oil producers in the province means the pipelines could be delayed indefinitely. At this point, we’d have to say house prices could fall much further. The carbon taxes are more nails in the coffin.
Even the experts are voicing caution, probably because they’re not sure themselves who has control of oil prices, and whether the BC pipeline issue will be solved. And BC doesn’t seem to be batting an eye, as gas prices there rose above $1.50 a litre.
Rachel Notley pointed out the BC premier’s ironic and hypocritical stance on Alberta oil with his new subsidies for LNG projects in BC.
And besides the BC carbon tax, and the investment killing removal of the corporate tax rate cut, there’s also the matter of how much Vancouver’s housing market and economy can take as interest rates rise too.
This is a text book test of the merit and wisdom of government regulation. BC’s government run auto insurance sector for instance, is already in deep trouble, rumoured to be on the verge of bankruptcy.
Not only does Alberta ease the prices BC drivers pay for gasoline, the Federal taxes on oil production are steep and distributed to the other provinces. Everyone benefits when Alberta’s energy sector thrives. It’s vital for Canada.
The WTI WCS price differential is a painful loss for Alberta Oil producers and of late it’s gotten worse due to pipeline bottlenecks. Will it get worse this year?
Alberta’s production capacity is impressive and has recovered by 7,000 m3 from 2 years ago. The issue is getting it to world markets.
With the US and global economies looking good (the recent tariff issue with China should be resolved), demand for energy and oil is forecast to be strong. BP forecasts a strong demand from developing countries.
International investors with a long term investment strategy should compare what you can buy in Calgary for $400,000 vs what you’ll get in the Vancouver market or Toronto market or Montreal housing market and you can see the long term investment advantages. Calgary is a much easier place to do business and buy real estate.
Which are The Best Neighbourhoods to Buy a Home in Calgary?
As a long time resident, I can tell you there are many excellent neighbourhoods, with great schools, shopping, and recreation. All of it is accessible.
If you enjoy exercise, you may find the communities along the Bow River best. There is a cycling/walking trail on both sides and the mountain biking park at Canada Olympic Park is on it too.
If you like beautiful views, Calgary has plenty. The northwest area of Calgary including those communities near Spy Hill, Coach Hill, and Nose Hill Park offer amazing views, some of the Rockies and foothills. Be ready for matching prices. The neighbourhoods on the northwest outskirts of the city offer unbelievable panoramic views of the Rocky Mountains to the west. Expect million dollar prices here. Homes on Spy Hill and Coach Hill offer incredible views of almost all of Calgary and the spectacular downtown skyline.
If water sports like sailing and windsurfing are important to you, Calgary has a number of man made lakes in the south end. The South has the largest selection of homes, with the Northwest next in number.
If you like cosmopolitan, the neighborhoods near downtown Calgary will appeal to you with the shops and walkability. And downtown’s plus 15 walkway system is close by too. Downtown city centre is where the condos are and virtually everything you need is here on 7th, 8th and 9th Avenue . The Bow River pathway is adjacent and Calgary’s convenient light rail transit can whisk you away to shopping in the south end of the city.
With the recession now largely in the rear view mirror, and with the price of oil rising steadily, homebuyers and property investors will be looking at Calgary homes differently.
With house prices so low, the expectation for buying residential properties in 2018 will improve. For speculators, the Calgary market is tantalizing, given that home prices in Toronto, Vancouver, Los Angeles, Bay Area, New York, and Miami have peaked.
In-migration to Calgary is rising and mortgage rates remain low. Although “made to depress” Canada housing policies will constrain the market, the outlook for Calgary real estate is for growth. The extent of that growth of course depends on the price of oil, incoming energy sector investment, and the value of the Canadian dollar vs the US dollar.
The Price of Oil – Already Above Expectations
(This section written in winter 2018) Oil Prices were never expected to rise near $50 yet are above $55 now. The Saudis have proven they control the price of oil, not markets. Tough to predict what they’ll do however their recent actions show some resolve and purpose. The fact prices have reached $55, well above the limits predicted by all the experts has to indicate something.
The production of shale producers in the US however is changing the oil markets. The US is now the number producer of oil in the world at about 11 million barrels a day. This is something no one considered possible.
You can check all the oil price predictions for yourself.
Economic Predictions for Calgary
If oil continues to rise steadily in price, Alberta stands to recover economically. Businesses have pared down their costs and are better able to profit from growth. Although not officially a big component of the rosy Canadian economic forecast, Alberta and Calgary are keys to the future.
Screen capture courtesy of CREB.com. Stats courtesy of CMHC.
Total house sales were precisely forecasted to be 600 higher in 2017 than 2016 with a price similar. Dead on accurate. New listings will total 32,731, 400 for the full year. Sales of apartment will rise slightly over last years numbers at about 2800 units.
The loonie remains around 78 cents CAD vs USD, maintaining an excellent premium on exports from Calgary, and exports of Alberta oil. Forex experts believe the US dollar forecast is upward, while the Canadian dollar forecast is downward.
If new construction starts are constrained, then the resale market may grow in the neighbourhood of 1% in 2018, 2% in 2019 and perhaps 3% in 2019. Of course, all predictions rest on the price of oil which as mentioned, the Saudis and OPEC control. And US shale production and drilling rig counts seem to moderate upward increases in oil prices.
The last word on Calgary and it’s oil-driven housing market is volatile. Statistical fundamentals are useless in predicting the movement of pricing and supply. Oil is a weapon, lever, and carrot used by politicians and sheiks, and they determine what prices will be.
Note: the preceding post is not meant as specific investment advice, but rather as a comparison of real estate investment or home buying opportunities. Please ensure you discuss all investments with a licensed professional.
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