Calgary Real Estate Market Forecast

Calgary Real Estate Market Forecast

Calgary Housing Market and Update

1st quarter home sales in Calgary fell 9% compared to last year and are down 30% from typical sales levels. Sales here are typical of that in Toronto and Vancouver.  Zolo however, says average prices have been rising the last few weeks, so perhaps March is in the rear view mirror.

The shaky Canadian economic situation has moderated the upward effect of the rising price of oil and has discouraged buyers to buy a home or condo in Calgary. It looks like a bad year coming for Calgary homeowners who want to sell in 2019.

Total sales transaction volume dropped 10% from $479,943,881 in February to $432,252,655 in March.  Sales in dollars are down 14% Year to Year. New listings shrank by 9% to 1,702 however total inventory is up 10% to 3,393 units.

Single detached home prices fell9.7% from $509,450 to $460,000, $49,450 in one month.  Prices are down 7.7% since last March.




It’s much harder for Realtors to sell as DOM rose 20 days to a depressing 57 days. Sales to listing ratio is down to 95%.

Total apartment sales are down 14% while new listings dropped 20%. Median apartment prices fell 1.39% to $249,000.

Overall, March wasn’t a great month for real estate sales in Calgary.

Calgary District Prices. Chart courtesy of CREB




Chart courtesy of CREB March Housing Sales Update

 

Chart courtesy of CREB

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.




Calgary home price history-timeline courtesy of CREB

 

single detached home price trend in Calgary. Chart courtesy of CREB




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.

Chart screen capture courtesy of Statista

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.

Chart courtesy of economicdashboard.alberta.ca

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.

Is There Hope for 2019/2020?

Yes, in 2019, we likely will see increased construction and manufacturing with the USAMC deal done and oil prices remaining high. This chart courtesy of CREB’s forecast report reveals some strength in the jobs market in 2018 and this should support home sales this fall. However, the shutting in of oil is drawing home prices down.

Screen Capture courtesy of TREB




Oil Prices and OPEC

Expert’s forecasts of oil prices and proving to  be understated.  Oil prices have far exceeded what most experts said would happen, now at an unexpected US $66 per barrel.

Currently the US has applied an embargo on Iranian oil, however they issued passes for some nations, which means Iran oil gets to flow.

Russia and Saudi Arabia desperately need higher prices. Photo courtesy of oilindustryinsight.com

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?  Let’s take a look at how has fared during the last 11 months against the NASDAQ.

From $42 to $71 per barrel, leaving the flatlining NASDAQ in the dust, Calgary’s oil patch is producing more and is more lean and profitable. Screencapture courtesy of bnnbloomberg.com

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 last spring? It had to be semi-detached homes in the east, northeast and east districts (+6% to 10% YoY).

Chart Courtesy of CREB.com

The uncertainty of Calgary’s housing market makes it a gamble however buying in this vibrant young city is more preferable than rolling the dice in overregulated and overpriced Vancouver or Toronto.

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.




If you’re considering moving to Calgary to work this year, be forewarned that Calgary is rated worst for affordability for lower income earners. Be prepared!

As of February 2018, average rent for an apartment in Calgary wass $1129 which is a 12% decrease from last year when the average rent was $1264 , and a 3.72% increase from last month when the average rent was $1087.  — from RentJungle Report

Calgary Housing Market Stats – Previous Months

As you’ll note sales are down from 18 months ago, and those were recession numbers. Most of the buying and selling were in the first half of the year, and there was a burst of buying due to the Fed mortgage rule changes.




CREB suggests a steady path to recover and a market very similar to 2017. They suggested rising interest rates, tougher mortgage rules, and stagnating wages should calm the hot market in 2018. Financial people are always citing microeconomic factors and mortgage rates as housing market factors, however people buy when the economy is good and is promising.

Calgary Housing Report for February 2018

Calgary Monthly Housing Stats February 2018 January 2018 October 2017 October 2016 September 2017
Total Homes Sales 657 583 910 1031 919
New Listings 1,293 1,288 1,483 1,326 1,873
Active Listings 2,456 2,199 3,250 2,574 3,479
Median Price 495,000 474,000 474,250 464,000 482,000
Average Price 575,407 575,407 544,984 529,378 556,372
Pending Sales 58 102
Days on Market 45 55 44 42 42

Above stats courtesy of CREB

South Calgary was the hot spot with 249 homes sold in February. The south has 799 homes listed for sale. 275 apartments were sold in downtown Calgary in February and there are 730 units available.  CREB expects sales of apartments to fall slightly in 2018, so buyers might have the upper hand this spring.

The Globe and Mail reports that 30% of Alberta’s new inventory remains unsold. This has to be one of the best buyers markets ever for investors, as long as you don’t mind waiting for the payoff.

And with housing prices predominantly in the $300k to $500k range, Calgary is still considered affordable, especially compared to Toronto and Vancouver where life is painful for renters, mortgage holders, and buyers in waiting.



Chart courtesy of CREB. Timeline of Calgary home prices

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.

Gas Price shock – Photo Courtesy of CTV.ca

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.

Calgary’s spectacular Peace Bridge for pedestrians and cyclists spans the Bow River

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 wisk 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.

Inmigration 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.

OIL Prices

Screen Capture courtesy of Marketwatch.com

The World Bank may have posted the best forecast for oil prices through to 2020.

Screen capture courtesy of the IMF

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.

Alberta’s economy is much more diversified than it used to be however it is impossible to replace the revenue generation of the Canadian oil sands, the world’s largest pool of untapped oil reserves.

CREB’s 2017 Economic Outlook and Regional Housing Market Update

In the Calgary Real Estate Board’s most recent 2017 Calgary Economic Outlook and Regional Housing Market update, CREB believes the pace of economic recovery will be slow but stable. Stagnant employment, wages, slow immigration, tighter mortgage lending restrictions, and made for Vancouver/Toronto economic policies will weigh on the Calgary housing market.

The latest report does forecast for 2018. However, Alberta’s economic performance is expected to be well up at 4.3% for all of 2017. New construction housing starts will be well down this year at around 3500 units. Multifamily housing starts are down just slightly from 2016 levels.




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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