2017 CALGARY REAL ESTATE FORECAST
And so another year rolls around, and with it comes a new hopeful economic outlook. What follows is a summary of the Calgary Real Estate Board’s forecast for 2017 provide to us at the 2017 Forecast Breakfast conference for Realtors which will provide my readers with a good overview of what we might expect. I suspect most of these predictions will apply to both the city, rural and small town markets but of course it does focus on the major Calgary city market for real estate forecasting.
Calgary’s housing market is expected to show signs of stability in 2017. City-wide sales are forecasted to total 18,335 units, a three per cent gain over 2016, but 12 per cent below long-term averages. This will help reduce supply levels and support some price stability in the second half of the year.
The transition in the housing market will take time. Alberta’s economy was much softer than many predicted over the past two years, as prolonged weakness in energy weighed on other sectors of the economy. We enter 2017 with high unemployment rates, weak migration and tightened budgets for consumers. Economic recovery is expected in the year ahead, but the pace of growth is forecasted to be slow, particularly in the labour market. This will impact the timing of recovery in the housing market.
While a shift is expected this year, it is important to keep some perspective. Housing sales activity is still forecasted to remain well below normal levels for the city and prices are not expected to be stable across all segments and property types.
Home prices are expected to remain relatively unchanged over 2016 levels in the detached and attached sectors of the market, while the apartment condominium sector faces more downward price pressure due to the excess supply.
This will continue well into 2017 until inventory levels ease and the market returns to more balanced conditions.
FACTORS INFLUENCING THE 2017 HOUSING MARKET:
Employment levels are forecasted to increase in the year ahead, but it won’t be enough to compensate for recent declines;
Net migration is forecasted to remain well below normal levels in 2017, but a second consecutive year of decline is not expected within the city limits;
Rising mortgage rates, stricter lending criteria and income adjustments can limit improvements in housing demand, causing further shifts between price segments in the detached segment and activity in attached and apartment;
Slower new home starts activity in 2016 and 2017 will help prevent further supply gains in the overall housing market;
High levels of new home and rental inventory will continue to create challenges in the resale condominium apartment segment. Until this supply can be absorbed, further downward price pressure is expected.
MARKET OUTLOOK RISK
Economic conditions are expected to stabilize in 2017. However, unexpected changes in oil prices or domestic and international policy shifts could weigh on the economic outlook for Calgary and the province as a whole.
Stability in the energy sector is based on expectations of energy prices rising above $50 US per barrel in 2017. If those expectations fall short, recovery in the energy sector may be delayed;
The new regime in the United States could shift existing energy and trade policies, creating uncertain impacts on the Canadian economy;
Recent pipeline approvals could support renewed interest in investment growth and benefit local economic conditions. However, public opposition and cost hurdles still exist for pipeline development, which will weigh on the feasibility of projects;
If local economic conditions do not improve in terms of employment, then Calgary risks a second consecutive year of out-migration, which could place further downward pressure on housing activity, including a rise in distressed sales;
Lending rule changes and mortgage rate increases could have a larger-than-expected impact on demand, preventing price stabilization in the Calgary market;
High office vacancy rates, combined with salary adjustments from a larger pool of available workers and housing options, could encourage some companies to consider relocating to Calgary. While this is unlikely to have any immediate impact on our economy, it could provide the basis to support economic diversification.
It is also interesting to see the pockets of prep work starting along parts of 22 X for the beginning of the Ring road construction over the next 2 to 3 years with a 2020 planned completion in this section. I feel as more and more of this begins to happen and people realize it is actually starting to happen that this will have a very positive impact on the 22X corridor and improving demand for properties in the Red Deer Lake, Priddis areas.