Fall 2015 Calgary Market Update with Don R.Campbell
Here are his thoughts:
The current Calgary real estate market conditions are disappointing but unsurprising. We have entered the 15th month of oil price slide, with our forecast model showing that the beginning of average sale prices will begin to slide between November to February. This will be a period of very mixed signals as the market begins to feel more pain than they have so far in this oil price slide.
The drop in oil prices which brought layoffs and lower consumer confidence have been the largest factor in todays market conditions with prices holding steady due to a lack of real desperation to sell. This hesitancy in the market has been multiplied by the lack of clarity from the newly elected government regarding the direction they will be going on taxation, regulation, and economic stabilizing strategy. These two main factors have pushed the listings up substantially while keeping the buyers on the sidelines.
However, it is important to note that there are 2 additional factors that are in play in the Calgary real estate market. Both are having a major impact on keeping a cap on downward price movement.
#1. The large increase in population that Calgary and surrounding region experienced in the 2 years leading up to the beginning of the oil price slide: These new citizens have supported both the housing re-sale market as well as the rental market.
#2. The rental market conditions: With relatively high rents and very low vacancy rates throughout the region, homeowners who were considering the sale of their home, but wishing to stay in the City, were finding it very difficult to find an appropriate rental property to move to. Plus, when they sat down and did the living cost math, many were finding that to move to a rental was actually going to cost them more per month than if they stayed in their home. This lack of a next home lowered the motivation level of those who listed their property and thus many were willing to stand firm on their price which in turn stabilized the average sale price. We should begin to witness an increased motivation to lower prices in the November to February period as vacancies ease up and the oil price recovery continues to be forecast to be a long while out.
2016 will continue to be a time of market mixed signals, however if oil price remain consistently below $50 and no new pipeline is given the go ahead we will begin to witness further drops in the average sale prices (and a large drop in demand for luxury homes). Vacancy rates will begin to move up, thus removing upward pressure on rents. This will free up the ability for more people who have listed their property to make a move into the rental market while they await more surety. Of course, this could all be worsened if the changes in regulations decrease the ability of the energy industry to create jobs and stabilize the economy.