More stability forecast for housing market in ’17
This year should bring some stability back to most sectors of Calgary area’s housing market, predicts the Calgary Real Estate Board.
It sees detached and attached prices remaining steady in 2017, while apartment-style condo prices are forecast to drop a further two per cent, said CREB chief economist Ann-Marie Lurie at the 2017 Economic Outlook and Regional Housing Market Forecast, held Wednesday at the BMO Centre at Stampede Park.
Since the start of the recession in late 2014, detached home prices have dropped an average 4.7 per cent and 11.3 per cent in the apartment sector.
“What’s expected to happen into 2017? The recession is expected to end. It’s the start of a transition,” said Lurie. “Overall, we expect to start to see that level of over-supply in the market is going to come into more balance and that should start to generate price stability this year. We do expect sales to improve slightly this year, but it will remain below long-term averages.”
Lurie pointed to a few key factors that will affect Calgary’s housing market this year. Employment levels are forecasted to increase, but won’t replace all jobs lost recently. Net migration will remain well below normal levels, but a second year of decline isn’t expected in the city. Mortgage rates are indicated to rise, combined with recently ongoing tougher rules for qualifying. Slower new home starts will help prevent further supply gains. And resale condo apartment sales will continue to be challenged by high levels of new apartment condo and rental supply.
Detached home prices have held more of their value these past two years because supply has been tightening, which supports prices, Lurie said. She pointed to both fewer listings for resale over this time, and a pull-back on starts by new-home builders.
Prices for detached homes in 2017 are expected to rise by 0.8 per cent over last year. Improvements in pricing are expected in the later part of 2017.
The attached segment of the market includes semi-detached (duplex) and row housing (townhomes). They have performed quite differently from one another. Sales in the semi-detached market have kept pace with longterm averages, even though they are down from the high of 2014. Prices in the semi-detached sector have declined by 5.49 per cent since the recession started.
Row home sales, meanwhile, declined 11.84 per cent in 2016, at the same time as inventory for this category pushed up to near record highs. Prices responded, and marked a 7.01 per cent drop since a recent high in March 2015. Prices in both categories are expected to stabilize as inventories ease with a modest increase in sales this year.
Apartment-style condos saw the biggest drop in prices due to rising supply and a significant drop in sales demand. Average months of supply pushed up to levels similar to those recorded in the last recession. At the same time that the resale sector saw more listings, the new condo and rental markets also are adding to supply pressure. With extensive rental selection and new rental product coming on, some renters just aren’t feeling the need to consider home ownership, the report said.
The oversupply situation may start to ease by the end of 2017, but Lurie expects prices to contract by another two per cent this year.
In the areas around Calgary, only Strathmore and Okotoks held steady on their annual average detached benchmark price year over year. Benchmark prices are that of a typical home based on a formula that uses various factors to ensure accurate comparisons.
Strathmore’s detached benchmark average price was $365,186, down 0.02 per cent from 2015, while Okotoks’ was $440,408, down 0.43 per cent. Cochrane’s detached benchmark average was $424,108, down 3.87 per cent; Airdrie was $385,617, down 2.88 per cent; and Chestermere registered $490,808, down 2.54 per cent. Calgary’s average detached benchmark price was $502,242 in 2016, down 3.23 per cent from 2015.