With the new year well underway, the Calgary Real Estate Board (CREB) is looking back at 2018 in order to make predictions for the Calgary real estate market. Based on a variety of factors, they expect that Calgary will continue to be a buyer’s market in 2019.
Factors that Led to a Buyer’s Market
There has been slow growth in the Calgary economy and, not surprisingly, a lack of consumer confidence. The city is experiencing higher unemployment rates than Alberta and Canada as a whole, and experts show that chronically unemployed workers may have given up on finding jobs.
Coupled with real estate factors such as high inventory and rising interest rates, the full picture of the buyer’s market becomes clear. CREB expects residential real estate prices to drop 2.34% in 2019, which follows a 1.52% fall in benchmark prices from 2017 to 2018.
An Overview of the Job Market
Ann-Marie Lurie, the CREB chief economist, says that her biggest surprise of last year was the lack of growth in the job market. At the beginning of 2018, unemployment in Calgary was predicted to fall to around 6%, but in fact, it reached 8.2% in the second half of the year.
“If employment starts to improve, some of the challenges start to shift in the energy sector and we see more confidence come back—then we could see some of that activity shift a bit, but it’s not expected to be enough to take us out of buyer’s market conditions this year,” Lurie told Global News.
Oversupply Dragging Down Housing Prices
The number of Calgary homes, as well as other property types, is much higher than the demand for them, which continues to pull down benchmark housing prices.
“The challenge this time is that persistence. It hasn’t been just for one year of oversupply. We’ve really seen this for four consecutive years in our market, and that’s been more of the challenge, which makes it very different from what we saw through the financial crisis,” Lurie stated.
Calgary detached homes registered the biggest market shift due to low demand. This surplus in available properties is expected to continue in 2019. The largest oversupply was for Calgary condos, which also saw the largest price adjustment back in 2014.
The projections for 2019 include a 2.49% drop in prices for attached homes in Calgary, a 2.33% drop for detached homes, and a 2.27% drop for apartments.
The Outlook for 2019 Is Not Entirely Bad
While homeowners and investors may not be excited about most of CREB’s predictions, there are a few bright spots. CREB expects builders to cut back on the number of new projects they are working on, which should help reduce available supply and potentially boost home prices.
And there is one predicted upswing for 2019—Calgary rentals should see an increase. This is partly due to new mortgage test regulations which have made it harder for some people to buy homes, and also due to the increase in migration into Calgary.
CREB stated that more than 14,000 people are projected to move to the city this year, 80% of whom are coming from outside of Canada. This is expected to decrease the number of vacancies on the market. Furthermore, these migrants will probably not buy homes immediately when arriving in Canada, which will help support growth in the rental market.