Rock-bottom oil prices are squashing momentum in Calgary’s residential real estate market as the Canadian energy sector struggles, but this may end up boosting home prices in Toronto and Vancouver, a Royal LePage report released this morning suggests.
Compared to last year, the Greater Toronto Area’s aggregate home price — a weighted average of median values for one- and two-storey homes, as well as condo apartments — rose 8.4 per cent to $613,733 in 2016’s first quarter.
Meanwhile, the Greater Vancouver price swelled 21.6 per cent to $1,044,750, according to the real estate firm’s quarterly House Price Survey.
These were country-leading gains. Both outpaced the national aggregate price, a 7.9 per cent year-over-year increase to $512,621 in Q1, and now, Royal LePage expects to see more price appreciation in Toronto and Vancouver residential real estate, especially as Canada’s labour market shifts from the Prairies.
“Redistribution of labour across the country is further reinforcing disparities among housing markets, as broader impacts of the oil recession on Alberta’s economy take hold,” says Phil Soper, Royal LePage’s president, in a statement.
While the shock from low oil prices continues to work its way through the energy sector and layoffs mount, Albertans will head for the economic centres of BC and Ontario, stoking the flames in already-hot local real estate markets in both provinces, Royal LePage has forecasted.
“We expect British Columbia, followed by Ontario, to be the top recipients of new household inflows in the coming year, which will further fuel housing demand and price appreciation in Greater Vancouver and the GTA,” Soper adds.
The effects of deflated oil prices have already been felt in Calgary. In March, BMO, citing Statistics Canada numbers, noted it has been more than 20 years since Calgary’s jobless rate had been so high.
That same month, the aggregate price of a home there fell 0.6 per cent year-over-year to $466,184 in the first quarter of 2016, according to the Royal LePage report, which looks at 53 of Canada’s largest markets.
Corinne Lyall, a Royal LePage broker/owner, highlights how the labour market is weighing on potential real estate market players.
“With growing uncertainty and reduced employment in the region, many would-be buyers are apprehensive about entering the market and are staying on the sidelines,” says Lyall, in a statement.
Last month, 1,588 units in Cowtown changed hands, representing an 11-per-cent drop from March 2015’s activity, according to the Calgary Real Estate Board (CREB).
That performance is to be expected given the economic backdrop, says Ann-Marie Lurie, CREB’s chief economist. “With no improvement in the labour market, it’s no surprise that we continue to face downward pressure on housing sales activity and prices,” Lurie explains in a statement.
There are already early signs of the migration flows from Alberta to BC and Ontario, Brian DePratto, a TD economist, told BuzzBuzzHome last week.
“The theory would tell you it should create some downward pressure within Alberta, because if people are more willing to sell, you have more supply on market, so that should push prices lower,” he explains.
DePratto notes that “converse would be true in Ontario and BC,” as more potential buyers on the market bolsters demand. “Keep in mind the relative size of that interprovincial migration versus other sources of population growth,” adds DePratto.
“I wouldn’t expect that impact to be that large,” he says.