A weak job market, slow growth, lack of confidence, high inventory and high interest rates are all reasons the Calgary Real Estate Board (CREB) said will result in a buyer’s market in 2019.
CREB forecasts Calgary residential prices will fall by 2.34 per cent next year. That follows a 1.52 per cent fall in benchmark prices from 2017 to 2018.
And the only upside in 2019 is expected to be in rentals.
CREB chief economist Ann-Marie Lurie said Wednesday that the biggest surprise for 2018 was the job market.
“The jobs never came back the way they were supposed to,” Lurie told a crowd at the BMO Centre.
Projections of unemployment in Calgary predicted the jobless rate to rise to around six per cent. Calgary’s unemployment rate fell to 8.2 per cent in December, 2018.
But Lurie said there is a mix of conditions CREB is looking for to begin the upward swing of Calgary’s real estate market.
“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,” Lurie said. “But it’s not expected to be enough to take us out of buyer’s market condition this year.”
Having more houses on the market than there is demand for, she said, has been a continual drag on housing prices.
“The challenge this time is that persistence,” Lurie said. “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.”
CREB’s housing forecast said detached homes faced “the most significant market shifts in 2018 due to weakness in demand” and expects oversupply to continue to weigh on that sector and the resale market.
Lurie said most oversupply has been in the apartment/condo sector, which has also has seen the most price adjustment dating back to 2014.
But Lurie said builders are expected to dial back their new projects, which should help ease new-home supply “to more normal levels” and should affect home prices.
Attached homes in Calgary are expected to fall by 2.49 per cent in 2019, detached homes by 2.33 per cent and apartments by 2.27 per cent.
One silver lining for Lurie in the 2019 forecast is the rental market. A combination of fewer people being able to buy houses because of the Office of the Superintendent of Financial Institutions’ B20 guideline — the mortgage stress test — and positive net migration to Calgary has helped push vacancy rates down and buoy the rental market.
“Vacancy rates are expected to drop further. And what does that do? It means there could be some opportunity for rental growth,” the CREB chief economist said.
The CREB forecast said that more than 14,000 people are projected to move to Calgary in 2019, with four of those five being from outside Canada.
Lurie expects there to be a delay between the arrival of those migrants and them purchasing homes.
“It might not necessarily translate into ownership on a quick way,” Lurie said. “So it’s going to take some time before that begins to impact ownership.”
— with files from Adam MacVicar.