It’s no surprise that these tough economic times are taking their toll on Calgary’s real estate market. Now well into the second year of historically low oil prices and quickly approaching a third year, Calgary’s labour market shows significant stress.
Although Alberta has made great strides to diversify its economy, the engine that helps run the province and give us our advantage is sputtering. A multi-decade high unemployment of 10.2% is beginning to strain other sectors besides oil and gas.
Construction Market Slowing Down
Calgary’s housing market is showing signs of slowing down, with housing starts decreasing to 630 in the month of October, a 40% decline from the year earlier. One of the areas of construction that has seen significant slow downs is the condo market. The extended economic climate and high supply of homes are factors that have influenced the drop in starts, even in previous quarters construction seemed to fly in the face of logic given the number of layoffs occurring.
More sobering housing stats include:
- Average home prices rose to $462,279, but is indicative of higher end home sales considering the median price was down 2%
- Benchmark prices for apartments fell sharply by 6.3%
- Single detached homes fell 3.2%
A Temporary Real Estate Boon?
Contrasting the poor construction performance and sluggish economy is the recent uptick in real estate sales. The Calgary Real Estate Board noted a 16% jump in the number of homes sold during the month of October.
But the tightening of mortgage rules recently announced by the Minister of Finance Bill Morneau are largely believed to have attributed to the increase in number of units sold. Sellers and buyers are rushing to close deals before the stricter mortgage rules take effect.
The availability of lower-priced homes and timing of the market are also factors that are believed to be attributed to the one time increase in sales. There is the possibility that buyers are attempting to purchase homes at the bottom of the market, which in turns drives up sales and present a more positive picture than what reality would suggest.
Signs Of An Upcoming Market Correction
With the dragging economy and slowing construction, analysts have been suggesting that Calgary is undergoing a market correction. The Canada Mortgage and Housing Corporation stated that it continues to see evident over pricing in the Calgary real estate market.
Further to the CMHC’s recommendation, they continue to suggest that the cities economic situation hasn’t fully materialized in the real estate market.
But there is a glimmer of hope as 2017 approaches. Indicators point to a rebalancing and a move away from the current buyers market.