A real estate analyst with the Real Estate Investment Network (REIN) says the fact that Calgary’s housing prices aren’t budging much shouldn’t come as a shock. “The current Calgary real estate market conditions are disappointing but unsurprising,” said Don Campbell, senior real estate analyst with REIN.
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The oil price slide is in its 15th month after all, he says. Previous forecasts stated prices would begin to slide from November 2015 to February 2016 amid mixed signals in the market.
“The drop in oil prices, which brought layoffs and lower consumer confidence, have been the largest factor in today’s market conditions, prices held steady due to a lack of real desperation to sell,” said Campbell.
Uncertainty all around
Add to the mix, Campbell says, is the uncertainty from Rachel Notley’s newly-elected government regarding taxes, regulation, or an economic strategy.
“These two main factors have pushed the listings up substantially while keeping the buyers on the sidelines,” he said.
According to Calgary MLS, the current detached home listings in September were 3,012 — or 17 per cent more — compared to the same period last year. Although the Calgary Real Estate Board reports total residential sales in the city were 1,448 units in September, well below typical activity levels for this time of year.
Year-to-date Calgary sales remained below both the five- and 10-year averages.
But Campbell says two other major factors are keeping a cap on housing prices — the growing population in the region before oil prices went south and the rental market.
“These new citizens have supported both the housing resale market as well as the rental market,” he said, adding this is directly connected to the second factor — high rents and low vacancy rates in the region.
He suggests that if homeowners were thinking of selling their home but wanted to stay in the city, when they did the math, they discovered it was cheaper to stay put.
“This lack of 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.”
But Campbell says to expect even lower housing prices to emerge with increased motivation from November to February with more vacancies but oil prices still remaining low.
Looking into 2016, Campbell says mixed signals will continue if oil prices stay consistently below $50 and there’s no pipeline announcement — likely resulting in more downward housing prices, plus a big dive in demand for luxury homes.
He expects vacancy rates will begin to move up, which could bring rental rates down.
“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.”