Calgary Q4 2019 Market Report
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Below is some real estate information presented by Ann-Marie Lurie, Chief Economist, Calgary Real Estate Board (CREB).
Alberta Growth
Alberta's growth estimates are lower than previously estimated and the Alberta economy is slowing, with energy still being the main driver of our economy. The question is whether the Trans Mountain Pipeline will be sufficient to stimulate Alberta growth. It will certainly have a short-term positive impact but it does not address future growth. The passing of laws that prevent future infrastructure growth will negatively impact future economic growth not only in Alberta but across the country - the new norm is that Canada is NOT the place for institutions and companies to invest when looking at the energy sector, in turn Alberta is no longer the place to go invest for the large institutional investors.
Capital spending in the energy sector is up 5% globally and down 14% in Alberta. Rig counts are down 34% (with 95 operating versus the typical 146 rigs) which in turn spills over into the entire economy. To solve this ongoing issue, we need a shift in the National mentality or develop new technology.
There is no consensus that North America is headed towards a recession.
Employment
Alberta employment has continued to fall, however Calgary experienced marginal employment increases in Q2 and Q3 - but we still have the highest unemployment in Canada. Growth was observed in professional and technical services as well as healthcare social assistance but these careers have nowhere near a similar pay level that were commonplace with the jobs that have been lost in the previous 5 years since the fall in energy prices in mid 2014. 2019 Calgary household income is lower than it was in 2014. This dynamic will maintain Real Estate growth at the lower end IE: up to 500k$, with exponentially slower demand and greater price strain for values beyond that. Due to Calgary migration levels being primarily with lower end paying jobs, the demand for rentals will grow as will the demand for lower priced homes.
Home sales
2019 Calgary home sales will basically match the low levels observed in 2018, however these figures are still 20% below the long-term averages that we experienced over the past 20 years. The current levels are similar to what we had in 2000. This sales demand level is the new norm for Calgary and is not expected to change dramatically for several years. Demand is stable however inventory levels are increasing putting downward pressure on pricing - our inventory levels remain very high thus continually placing downward pressure on pricing, especially for the apartment / condominium sector as well as for homes valued above $600,000 and exponentially more so once we cross the $1,000,000 price point.
There are several purpose-built rental complexes either nearing completion or under construction. Higher density and multi-family construction are up, with 26% being directed strictly at rentals. New home construction remains very steady although trending downward.
Inventory supply
The numbers are scattered, depending on price and product type - the only improvement is in the prices up to 500k$. Average time on the market for the 500 to 600k$ range is 5 months, for 600 to 700k$ is 5.5 months, for 700 to 1m$ is 6.5 months and above 1m$ is 12+ months with increasing time required to sell as we cross the 2m$ threshold. Ann Marie again showed that inventory levels across virtually all price points remain oversupplied.
Inventory levels increased in the spring of 2018 when the Federal Government instituted a mortgage stress test primarily to thwart the high price gains in Toronto and Vancouver, however did not limit the new requirement strictly to those two centres, rather made it a coast to coast to coast mortgage requirement thus putting massive strain on buyer's ability to move on up from their existing homes to a higher valued residence.
Pricing
Detached homes are still 7% below the values seen at the 2014 peak and down 2.5% from the start of this year.
Attached homes are 10% lower since the peak and down 3% in price this year.
Condominiums are 17% below the peak and also saw a 3% price drop this year, with the higher values seeing an even greater drop.
Many Calgarians were used to a 2 to 3-year cycle for increased real estate values, we are now in more of a ten-year cycle.
Real Estate is no longer considered an investment, rather is a place to live with value growth tied more closely to inflation. Of note is that Calgary's average income is still higher than that of either Toronto or Vancouver which makes it far more affordable, however we are not yet diversified to a sufficient extent to attract more migration.
The 2020 pricing projection is at best price stability with a likelihood of price declines depending on product type, location and price range.
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