Calgary real estate takes a blow as oilpatch job losses continue to mount
CALGARY Concerns about fresh job losses, volatile oil prices and lower capital spending are weighing on Calgary’s real estate market and economists predict another slow year for home sales and falling prices in the city
Statistics Canada’s labour force data for December showed Alberta lost 16,900 jobs between November and December and the province’s unemployment rate ticked slightly upward to 6.4 per cent from 6.3 per cent.
In Calgary, the head-office capital of the Canadian oilpatch, the unemployment rate declined to 7.6 per cent in December, from 7.9 per cent in November, but is still higher than it was a year earlier when it was 7.5 per cent.
A fresh round of layoffs in recent weeks at Calgary oil companies, which have been slashing budgets as oil prices have declined, has affected the city’s real-estate market and home sales, said Ann-Marie Lurie, Calgary Real Estate Board’s chief economist. She noted that consumer confidence is down across the city over concerns about the economy.
“Every single month of this past year has been well below what has been a normal level of activity for this city relative to the 10-year average,” she said.
The number of homes sold in Calgary was down 14.5 per cent over the course of 2018 when compared with 2017, and down 20 per cent compared to the 10-year average.
“For many people out there, I feel for them,” Lurie said. “We’re in a situation where sales have been weak, we have too much inventory in our market and prices have been falling.”
The average price of a detached house in Calgary peaked at $521,600 in October 2014 just as global oil prices were collapsing, but before local oil and gas companies began slashing budgets and laying off staff.
Prices have since tumbled seven per cent to an average of $481,400 in December, according to CREB data released this week.
The decline is even more noticeable for apartments/condominiums. Unit prices also peaked in October 2014 at $300,500, but have since fallen 16 per cent to $251,500 last month.
Lurie said a combination of higher interest rates, stricter lending rules issued by the Office of Superintendent of Financial Institutions, a sluggish economic recovery and unemployment have caused Calgary prices to tumble.
The CREB will release its forecast for 2019 later this month, but Lurie said unemployment data is adding downside “risks” for the outlook.
Homebuilders have also contributed to the oversupply in the local market. City data show new housing starts were up 6.3 per cent through September 2018 compared with the same period a year earlier.
Real-estate brokerage Royal LePage in December released its 2019 forecast for the Calgary market and expects home prices to decline another 2.3 per cent.
“Until we see marked improvement in our energy sector, and more full-time employment, we won’t experience higher home sales,” said Corinne Lyall, broker and owner of Royal LePage Benchmark.
A drop in property values has also affected Calgary’s commercial properties. City officials this week said the total assessed value of downtown offices fell by $5 billion over the past year and now makes up only 18 per cent of the total non-residential tax base, which is down from 32 per cent in 2015.
The Calgary Chamber of Commerce has expressed concern that the city is shifting the tax burden to offices outside downtown, some of which have had tax increases of nearly 20 per cent over the past three years.
“We have a tremendously resilient business community that has expressed a desire to grow — they want to grow the city, the economy and jobs — but unfortunately we’ve seen policies by all levels of government that are stifling growth,” chamber spokesperson Mark Cooper said.
Cooper said the problems facing both residential and commercial real estate could be solved by a stronger economic recovery, which could be facilitated with more business-friendly government policies.
“If you bring investor confidence back to the city, you’ll bring confidence back to all sectors, right back to consumer confidence as well,” he said.