Calgary’s low housing demand is expected to limit downward pressure on supply levels, causing housing prices to decline, according to the Calgary Real Estate Board (CREB) 2015 mid-year forecast. Despite this, Calgary’s housing benchmark prices are expected to decline by less than one per cent annually.
“Further job losses are expected in the second half of the year,” said Ann-Marie Lurie, chief economist at CREB, in a press release. “These employment changes, combined with overall weakness and slower than anticipated recovery of oil prices, are expected to keep housing demand relatively weak for the rest of 2015. However, with the initial shock of oil price declines having dissipated, the pullback in sales activity in the second quarter is not expected to be as dramatic as the first part of the year.”
Sales activity in Calgary is expected to total 19,798 this year, 22 per cent less than in 2014, but only six per cent lower than average activity over the past five years.
Inventory levels rose in the first half of 2015 due to dramatic swings in new listings, yet they still fell short of previous highs. Traditionally, the second half of the year signals easing inventory levels as the fall and winter markets approach. This year, housing supply levels are expected to remain steady due to improved selection in the rental markets, construction projects being completed and a slowdown in the decline of resale listings.
The price moderation that is expected will not be the double-digit decline that has been suggested due to the limited supply in the market. Calgary’s residential benchmark price is expected to average $448,354 this year, which is a 0.2-per-cent drop from 2014.
“It’s a two-sided coin when talking about pricing for buyers and sellers,” said Corinne Lyall, president of CREB, in a press release. “Some buyers have the expectation that they will get significant price reductions in this market, but that’s not always the case. In some areas, supply levels are more balanced with demand and that creates price stability. On the other hand, in most situations, it will be the sellers who need to adjust expectations, particularly if they have to compete with a large amount of comparable product in the neighbourhood.”
Slower demand is affecting all sectors of the market, but none as much as the apartment sector as it is projected to experience the largest decline in sales and price growth in the second half of 2015 due to the rising supply in competing markets. It is difficult for sellers in the apartment sector to attract buyers when the detached and attached sectors offer more selection. New apartment units and greater selection in the rental market represent additional competition.
If the second half of the year sees no further deterioration in the economic climate, housing demand could level off as potential buyers may decide to disregard short-term risks and take advantage of the higher housing supply. This could lead to relatively balanced market conditions and prevent further price drops.
“Ultimately, what happens to prices will depend on supply levels and how much they go up or down against demand,” said Lurie. “The duration of this economic downturn and the resulting job loss will determine which direction supply will go in the months ahead.”