There isn’t any one reason why Calgary’s housing market, once the hottest in Canada, struggles to regain its footing.
According to the Calgary Real Estate Board (CREB), there are at least four.
CREB presented them along with the release of its mid-year update to the 2018 Calgary Economic & Housing Outlook, which predicts sales will drop 9.7 per cent this year while prices cool by another 1 per cent.
“We have to keep in mind that we’re still in a recovery mode,” CREB Chief Economist Ann-Marie Lurie tells Livabl.
Rates are on the rise
Interest rates have continued to rise this year on the shoulders of the Bank of Canada’s two hikes to the overnight rate, which influences the mortgage market.
At the same time, tighter lending rules are subjecting more potential homebuyers to mortgage stress testing, creating a headwind for borrowers in real estate markets across the country, including Calgary.
Economic recovery isn’t complete
“Economic recovery is expected to gain further traction through the latter part of this year,” reads the CREB outlook report. “This should help limit the pullback in demand, but it is unlikely it will be enough to offset the declines from the first portion of the year,” the report continues.
CREB anticipates 17,047 units will trade hands this year, while the Conference Board of Canada has pegged Metro Calgary GDP growth at 2.87 per cent for the year, less than the 6.29 per cent gain in 2017 that followed a 3.57 per cent decline the preceding year.
High-paying jobs haven’t returned
The Conference Board of Canada also forecasts employment growth to track around 3 per cent this year, but not all jobs are equal. “The type of job growth has shifted, as employment gains have not occurred in our traditional sectors,” notes CREB in a news release.
The provincial resource sector hasn’t seen a lot of job growth, and that’s led to challenges for Calgary, suggests Lurie. For example, corporate jobs in the city that support the oil industry have not come back. “Those are higher-paid jobs, and that does impact ownership and what people will [and] can afford to purchase,” she explains.
And consumer confidence has taken a hit
Uncertainty over whether projects like the Trans Mountain Pipeline expansion will move forward has rattled consumer confidence. The pipeline expansion would increase oil capacity between Alberta and BC threefold, but it has been subject to opposition, including court challenges from Burnaby and First Nations.
“Are these pipelines going to get built, will they start to see it really turn around into job growth?” says Lurie, voicing common local concerns that have dampened the positive impact of higher oil prices.
… but migration has blown past expectations
“One thing that really did stand out to me was our migration numbers,” says Lurie. “We finally had a migration number that was far higher than expected,” she adds. Net migration to the city rose by 11,588 this year, according to Calgary’s 2018 Civic Census Results, up from a paltry 974 the previous year and far surpassing the expected 2,000 net increase.
While that’s still below the normal 15,000-to-18,000 range, Lurie sees it as an encouraging sign for the local housing market. “That is important… to reduce the excess supply in the market,” she explains. As people arrive, they typically begin renting. As the vacancy rate sinks and rents rise, some tenants then evaluate their housing costs.
That, Lurie suggests, results in more homebuying.