218 Calgary Economic & Housing Outlook
218 CREB. All rights reserved. The forecasts included in this document are based on information available as of December 217. Prepared by Ann-Marie Lurie, CREB chief economist. Edited by Terence Leung and Tyler Diffley. Designed by Sarah Maynes and Haley Steel. 3 Manning Road NE Calgary, Alberta T2E 8K4, Canada Phone: 43-263-53 Fax: 43-218-3688 Email: info@creb.com creb.com crebforecast.com crebnow.com
Forecast Summary... 4 Regional Economy... 6 Energy Sector... 8 Lending Market and Interest Rates.... 9 Labour Market... 1 Population....12 Housing Market Activity... 14 Rental market...14 New home... 15 Resale market...16 Detached sector....18 Attached sector...2 Apartment sector...21 District Summary...22 Surrounding Area.... 24 Airdrie....26 Okotoks...28 Cochrane...29 CREB 218 CALGARY ECONOMIC AND HOUSING OUTLOOK 3
FORECAST SUMMARY THE HOUSING MARKET IS EXPECTED TO CONTINUE MOVING TOWARDS RECOVERY IN 218, BUT CHALLENGES REMAIN. Housing market conditions are expected to remain relatively unchanged in 218, as the impact of higher lending rates and stricter lending criteria are offset by modest improvements in the economic climate. Recent changes may have prolonged the recovery period in our market, but it is not expected to completely derail the transition. migration last year, with expectations of further improvements into 218. The opposing impacts of the changes in the lending environment and economic gains are expected to cause adjustments in demand/supply balances based on price range and product type, creating pockets of over/under supply and generating different paths of price recovery. Overall, it is expected to generate conditions comparable to 217 and the dynamics within each sector of the market will vary. The path to recovery is expected to be bumpy, as the market adjusts to a new normal. We are entering 218 with elevated supply levels and an environment of rising rates paired with stricter lending criteria. However, the improving economy generated modest job growth and net Minimal changes in sales activity are expected to be met with easing new listings for some property types, limiting the upward pressure on supply. This should help support more balanced conditions, preventing widespread benchmark price declines. Calgary Sales and Price Growth Forecast 3, 25, 2, 15, 15% 1% 5% More balanced market conditions will be led by the attached and detached sectors of the market, while the apartment sector will continue to struggle with excess inventory in 218. Prices will likely continue to face some downward pressure in the apartment sector, with stabilization not expected until the latter portion of the year. 1, 5, Detached Attached 8 9 1 11 12 13 14 15 16 17 18 Apartment 1 Year - Average Price growth Forecast % -5% -1% Source: CREB The attached sector may benefit from changes in distribution, as some demand shifts from the detached sector to the attached sector of the market, supporting modest price gains of.38 per cent. Easing demand in the detached sector is expected to be met with easing listings, supporting overall stability in pricing. FACTORS CONTRIBUTING TO STABILITY IN THE CALGARY HOUSING MARKET: Improvements in the economic climate countering the impact of changes in lending criteria. Employment growth and reduction in the unemployment rate. Easing vacancy rates in the rental market. Relative affordability in the market. Improved confidence in the overall economy. Modest gains in migration. 4 CREB 218 CALGARY ECONOMIC AND HOUSING OUTLOOK
UPSIDE/DOWNSIDE OUTLOOK RISK: Stricter lending criteria and rising rates has a greater than expected impact on demand for housing, causing downward pressure on prices. Any significant shifts in the energy sector could affect employment and confidence in the market, influencing overall housing activity. If unemployment levels remain elevated this could weigh on demand and prevent easing in supply levels. If employment growth, wages and net migration improve at a faster pace than expected, stronger than expected demand growth in 218 may occur. High office vacancy, drop in rents, housing availability in all price ranges, and the available pool of skilled labour could help attract business investment to the city. Changes to NAFTA could cause uncertainty in the market, impacting economic growth. FORECAST TABLE 215 216 217(F) 218 (F) Forecaster Economic Indicators Alberta GDP Growth -3.69% -3.83% 6.69% 2.9% Conference Board of Canada Calgary CMA GDP Growth -3.3% -3.65% 7.12% 2.46% Conference Board of Canada Calgary CMA Employment Growth 2.4% -1.49% 3.41% 2.13% Conference Board of Canada City of Calgary Net Migration 24,9-6,527 974 1,9 City of Calgary Housing Starts: Single Family Calgary CMA 4,138 3,489 4,423 4,678 Conference Board of Canada Housing Starts: Multiple Family Calgary CMA 8,895 5,756 7,111 6,798 Conference Board of Canada Calgary CMA Two-bedroom Average Rent 1,322 1,258 1,247 1,25 CMHC Calgary CMA Vacancy Rate 5.3% 7.% 6.3% 6.% CMHC Overnight Bank of Canada Target Rate.65%.5%.7% 1.38% Royal Bank of Canada WTI Price ($USD) $48.67 $43.33 $5.79 $55.33 U.S. Energy Information Administration Henry Hub Spot Price ($USD) $2.73 $2.61 $3.12 $3.24 U.S. Energy Information Administration 215 216 217 218 (F) Forecaster MLS System resale market City of Calgary Sales 18,839 17,796 18,882 18,853 CREB Price growth 1.6% -3.73% -.17% -.13% CREB New listings 33,876 32,269 34,13 34,354 CREB City of Calgary detached Sales 11,517 11,26 11,831 11,68 CREB Price growth 1.17% -2.98%.63% -.1% CREB City of Calgary attached Sales 4,98 3,865 4,182 4,276 CREB Price growth 1.71% -4.23% -.13%.38% CREB City of Calgary apartment Sales 3,224 2,725 2,869 2,898 CREB Price growth.9% -5.97% -3.97% -1.% CREB 5
REGIONAL ECONOMY GDP Growth Comparison 8% 6% 4% Economic growth throughout the province exceeded expectations in the first half of 217. Annual estimates of over four per cent GDP growth in 217 place Alberta as the fastest growing economy. 2% This needs to be put into perspective, as the % -2% Alberta economy shrunk by 3.7 and 3.8 per cent in 215 and 216. Growth in 217 does not compensate for all losses over those years. Some -4% -6% 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18 may point towards another boom, but this is not the case, as current economic activity remains below pre-recession levels. Calgary GDP growth Alberta GDP growth Canada Forecast Industry Share by Total GDP - Calgary 216 16% 3% 2% 1% 2%3% 4% 5% 4% 4% 7% Source: Statistics Canada, Conference Board of Canada 5% 5% 32% 7% Source: Statistics Canada, Conference Board of Canada Forecast. Primary & Utilities Construction Manufacturing Transportation & Warehousing Technical & Professional Services Wholesale Trade Retail Trade Information and Cultural Industries Finance, Insurance and Real Estate Healthcare & Social Assistance Educational Services Accommodation & Food Services Arts & Entertainment Other Services Public Administration Most forecasters anticipate provincial economic growth to ease to just over two per cent in 218, but most forecasters do not expect a full recovery from the recession to occur until 219. However, the province is moving into the phase of slow recovery and this is a welcome change from the past several years. In Calgary, 217 also marked the end of the twoyear recession and further gains are expected in 218. Despite the two-year growth, overall economic activity is expected to remain below 214 output. Growth figures appear strong, but this is over a lower base level, as Calgary has not experienced two consecutive years of recession since the 8s. Overall, fundamentals are supporting a modest recovery to span over the next two years. 6 CREB 218 CALGARY ECONOMIC AND HOUSING OUTLOOK
GDP Growth by Industry - Calgary 15% 1% 5% % -5% -1% -15% -2% TOTAL 215 216 217(F) 218(F) Source: Statistics Canada, Conference Board of Canada Forecast. Primary & Utilities Construction Manufacturing Transportation & Warehousing Technical & Professional Services Wholesale Trade Retail Trade Information & Cultural Industries Finance, Insurance & Real Estate Healthcare & Social Assistance Educational Services Accommodation & Food Services Arts & Entertainment Other Services Public Administration ECONOMIC GROWTH BY INDUSTRY: Throughout the recession, 7 per cent of our industries recorded a contraction in growth. Not all industries have seen their GDP rise to 214 levels, but most saw some rebound in economic growth in 217. Moving into 218, growth is expected to be broader based, as most of the sectors are expected to see an increase in activity. The only sectors expected to see GDP levels remain below 214 figures include construction, manufacturing, information and cultural industries, and other services. CREB 218 CALGARY ECONOMIC AND HOUSING OUTLOOK 7
ENERGY SECTOR The rebound in the oil sector is playing out as many had expected: slowly. West Texas Intermediate (WTI) prices in 217 have improved from the lows of the past two years, but struggled to push above the $5 level throughout most of 217. Many petroleum producers adjusted operations to support a longer time frame of lower oil prices. This mostly involved cost cutting, focusing on efficiencies and reviewing their portfolio of assets. There will likely continue to be pockets of readjustments, but this restructuring has enabled companies to be better suited to operate in a lower-price environment. Alberta Annual Energy Investment Spending $ Millions 7, 12 As we move into 218, the expectation is WTI oil prices will remain bound between $5 and $65 per barrel. OPEC and Russia agreed to extend the supply reduction this year, however, additional supply may come from non-opec sources, preventing stronger price growth. While oil prices are significantly higher than the $3 monthly lows recorded during the recession, levels are not high enough to encourage any significant increase in new investment spending. Companies are expected to continue to focus on best returns, placing some limits on investment growth in Canada. Heightened uncertainty regarding the regulatory process, combined with low energy prices, has impacted investment activity in our energy sector. Estimated energy investment is less than half of the level recorded in 214. 6, 5, 4, 3, 2, 1, 1 8 6 4 2 Some improvements are expected over the next few years, but investment activity will remain well below levels recorded 211-215, limiting the growth for energy sector jobs. Slower energy sector employment growth will filter through many aspects of our economy, including the housing market. 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18 19 Nominal Investment Spending energy Alberta WTI Oil Price Forecast Source: Conference Board of Canada Conference Board of Canada Forecast U.S. Energy Infromation Administration Pipeline capacity issues will continue to weigh on the market and impact the differentials between the WTI price and the Western Canadian Select (WCS) price that we receive for our commodity. Earlier optimism regarding pipeline developments was overshadowed by cancellations and delays. There is also skepticism surrounding construction of approved pipelines, due to shifts in regulation and legal appeals creating lengthy delays and additional uncertainty. CREB 218 CALGARY ECONOMIC AND HOUSING OUTLOOK
LENDING MARKET & INTEREST RATES There have been changes in the lending market designed to improve the long-term financial stability of the housing market over the past several years. The impact of the changes is often dependent on the current market conditions and the extent of the changes. Lending Rates 7 6 5 4 Minimum Qualification Rate 2% In October 217, the Office of the Superintendent of Financial Institutions extended the stress test applied to only high-ratio loans to all loans. The stress test requires all buyers to qualify at the greater of the Bank of Canada s five-year benchmark rate or the contracted rate plus 2 basis points (two per cent). Implementation of this change occurred on Jan. 1, 218 for all federally regulated institutions. 3 2 1 5 6 7 8 9 1 11 12 13 14 15 16 17 18 Overnight Target Qualification Rate Prime Business Rate Forecast 2% Source: Bank of Canada, Royal Bank of Canada Forecast, CREB adjustment The extent of the impact in terms of housing market conditions, and the effectiveness with respect to risk reduction, is highly debated. However, many do agree these changes will push some out of the marketplace or towards unregulated lenders. In addition to the change, many forecasters anticipate the Bank of Canada will increase rates by an additional.75 per cent in 218. Steady increases are expected, but the pace of gains will ultimately depend on wage growth, inflation, exchange rates and how the economy responds to higher interest rates. Higher lending rates, combined with stricter qualifications, tend to weigh on demand and impact price appreciation. These rate hikes are also coming at a time when our market is coming out of a recession. The period of recession has impacted wage growth and caused excess supply in the housing market, weighing on prices. However, there is also more supply in the lower prices ranges and this makes the housing market more affordable than it was two years ago. In 217, more than 63 per cent of the housing supply was priced below $5,, and 41 per cent of the detached supply was also below that price. This is an improvement compared to several years ago, where the share of supply under that price range was 52 per cent for all properties and 36 per cent for detached. Availability of alternative lenders, supply choice in the lower price ranges and an improving economy will help temper the downward demand impact of the rule changes and higher rates. We anticipate these adjustments will prolong the period of recovery in our market and create some pockets of oversupply during the adjustment period. CREB 218 CALGARY ECONOMIC AND HOUSING OUTLOOK 9
LABOUR MARKET Following job losses and high unemployment in 216, 217 recorded employment gains of over three per cent and a drop in the unemployment rate to 7.5 per cent by December. Employment gains are a requirement to ensure stability and, eventually, recovery in the Calgary housing market. With an additional job growth of two per cent forecasted for 218, this should continue to support positive momentum in the housing market. Calgary CMA Full & Part Time Employment Number of Jobs Unemployment Rate 8, 12% 6, 1% 4, 8% 2, 6% 4% -2, 2% -4, -6, % 4 5 6 7 8 9 1 11 12 13 14 15 16 17 Full-Time Employment Growth Unemployment Rate Part-Time Employment Growth (Y/Y) Source: Statistics Canada Calgary CMA Employment Growth 12% 1% 8% 6% 4% 2% % -2% 89 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18 19 2 Gains in full-time jobs have been the main source of growth in 217, with nearly 2, jobs added to the Calgary Census Metropolitan Area (CMA). During the same period, over 4, part-time jobs were lost, as some of the part-time positions were converted into full-time. The annual gain in fulltime employment was not large enough to offset the losses in 216, as there continue to be fewer full-time positions in 217 relative to the highs recorded at the beginning of 215. There are some lingering issues that will impact the dynamics of growth in the housing market. Chief among these are high unemployment rates and the specific sectors where we are seeing job growth. Most of the job growth in 217 has been in sectors that have traditionally lower wages, and the high unemployment rates could continue to weigh on wage growth in the city. The unemployment rate has eased from recent highs, but remains elevated compared to historical levels across all age groups. Despite recent adjustments, unemployment levels remain elevated by historical standards, especially for individuals aged 55-64. Job growth did not occur across all sectors in 217. Figures point towards notable growth being limited to public administration, accommodation and food services, healthcare and social assistance, wholesale trade and transportation and warehousing. These areas generally tend to have lower wages than the areas where job losses still occurred. Job losses mostly occurred in primary industries 1 and utilities, construction, manufacturing, and technical and professional services. Employment Growth Forecast Unemployment Rate Source: Statistics Canada, Conference Board of Canada Forecast 1 Primary industries include occupation in agriculture, forestry, fishing, hunting, mining, quarrying, oil and gas extraction, etc. 1 CREB 218 CALGARY ECONOMIC AND HOUSING OUTLOOK
Employment Growth by Industry - Calgary CMA 2, 15, 1, 5, -5, -1, -15, 215 216 217 218 (F) SourceSource: Seasonally adjusted data, Statistics Canada, Conference Board of Canada Forecast Primary & Utilities Construction Manufacturing Transportation & Warehousing Technical & Professional Services Wholesale Trade Retail Trade Information & Cultural Industries Finance, Insurance & Real Estate Healthcare & Social Assistance Educational Services Accommodation & Food Services Arts & Entertainment Other Services Public Administration More people were employed in 217 than in 214 prior to the recession, but improvement came mostly from the service side of the economy. However, there are over 3, fewer jobs today from the primary industries and utilities, construction, and manufacturing sectors compared to 214. These three sectors are expected to record some employment growth in 218, but it s not expected to be enough to cover the previous job losses. Despite some shifts within the labour market, continued job growth and reduced unemployment should help support the economic recovery in our city and province. There may continue to be some lagging effects on wages, but overall growth will prevent further declines in our housing market. CREB 218 CALGARY ECONOMIC AND HOUSING OUTLOOK 11
POPULATION City of Calgary Net Migration 3, 25, 2, 15, 1, Due to net migration gains, Calgary benefited from strong population growth leading up to the recession. This helped fuel growth in our housing market, but recent weakness in the energy sector and job market slowed Calgary s population growth from an annual average of three per cent during 212 214 to less than one per cent average over the past two years. 5, -5, -1, 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18 19 According to the 217 civic census, the city s population stands at just over 1.2 million. The pace of growth over the next two years is expected to improve to one per cent annually, as net migration levels inch up. Forecast Alberta Quarterly Net Migration 3, 25, 2, 15, 1, 5, Source: City of Calgary Civic Census Result 217, City of Calgary Forecast Following the financial crisis, and prior to the 215 recession, on average, Calgary welcomed over 2, people to the city each year, supporting the growth in both the new-home and resale housing markets. However, by 216 this trend reversed, as more people left than arrived, causing net migration to decline by 6,5 people. While we did not experience a loss in 217, with 974 migrants coming to the city, net migration remained well below normal levels. -5, -1, 6 7 8 9 1 11 12 13 14 15 16 17 Net Interprovincial Migration Net International Migration Source: Statistics Canada While the City of Calgary census figures do not provide details regarding the source of migration, we can gain insights from provincial migration figures. In Alberta, net migration eased compared to previous levels. The slower growth was due to inter-provincial outmigration, but we continued to see international migrants come to the province. 12 CREB 218 CALGARY ECONOMIC AND HOUSING OUTLOOK
Weaker net migration, and therefore population growth, has weighed on housing demand and contributed to the supply build up in the market, as there have been more new-home starts than the number of new households formed. As economic conditions start to improve, forecasters anticipate net migration levels will improve as well. The City of Calgary estimates that net migration will average just over 2, people annually over the next few years, with annual net migration not returning to double digits until 222. Despite the slower pace of net migration, the improvements should help prevent further contractions in housing demand and alleviate some of the excess supply currently in the housing market.
HOUSING MARKET ACTIVITY RENTAL Weak net migration and job growth, combined with rising rental supply, has kept vacancy rates elevated in Calgary. Vacancy rates reached a high of seven per cent in 216, but have improved slightly in 217, reflecting the slow and gradual improvement in our market. Employment gains, particularly in the lowerpaying sectors, and international migration supported some easing of this trend. In 217, apartment vacancy rates edged down to 6.3 per cent, based on the October CMHC rental market survey. Calgary CMA Total Purpose Built Row and Apartment Vacancy Rate 8% 7% 6% 5% 4% 3% 2% 1% % 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18 Forecast Source: CMHC, 217 based on October CMHC survey, CMHC Forecast Calgary CMA Average Change in Apartment Rents 2 15 1 5-5 -1 5 6 7 8 9 1 11 12 13 14 15 16 17 While rental demand improved in 217, supply levels also rose, keeping vacancy rates elevated compared to historical averages. CMHC indicated that supply growth occurred for both purposebuilt rental and investor-owned apartment units. 5,218 additional units were added to the supply in 217, of which over 3,5 units were investor owned. Of the nearly 6,-unit rental universe, 36 per cent of the supply is coming from investor-owned apartment units. Elevated vacancy rates have placed downward pressure on rent levels and landlords offered several incentives to tenants. The CMHC survey indicated that using same sample methodology, apartment rents declined by 7.5 per cent in 216 and another one per cent in 217. Improving economic conditions, in terms of modest employment gains and net migration, are expected to support some demand growth for rental product. More stringent lending conditions, combined with rising lending rates, could prolong the time many individuals spend in the rental market. While supply levels may continue to face some upward pressure from investorowned condominiums, conditions supporting demand growth are expected to outweigh supply pressure, causing a gradual easing of the vacancy rates and generating some stability in 218 rents. Source: CMHC, 217 based on October CMHC survey 14 CREB 218 CALGARY ECONOMIC AND HOUSING OUTLOOK
HOUSING MARKET ACTIVITY NEW HOME Strong starts activity in 214 and 215 (mostly in the multi-family sector) occurred at a time when demand was easing due to economic conditions. This caused many builders to scale back starts in 216 in reaction to the new economic environment. Starts activity in 216 was at the lowest level recorded since the financial crisis, while detached starts were at their lowest levels since 1988. Improving economic conditions through 217 supported some gains in starts, with annual levels of 4,423 and 7,111 for detached and multi-family units. Calgary CMA Under Construction and New Home Inventory 18, 16, 14, 12, 1, 8, 6, 4, 2, 4 5 6 7 8 9 1 11 12 13 14 15 16 17 2,5 2, 1,5 1, 5 Gains in the detached market were supported Single-family under construction Multi-family under construction Inventory Source: CMHC by improved confidence in the market, along with easing inventories in the resale sector in the Calgary CMA Housing Starts early part of the year. In 218, detached starts are expected to remain comparable to 217 levels, 12 well below longer-term averages. 1 Activity in the multi-family sector is expected to continue to adjust, as demand has not kept pace with the supply in the market. The rise in newhome inventories in 217 was mostly due to gains in the multi-family sector, which accounts for nearly 78 per cent of the units in inventory. While units under construction have eased, oversupply persists in the higher-density areas, impacting both ownership and rental prices. Multi-family starts activity increased by 24 per cent in 217 over 216. Further growth is not expected in 218 until some of the excess inventory in the market eases. The Conference Board of Canada is forecasting Calgary CMA starts to total 11,475 units in 218, a slight decline over last year. Despite the annual decline, detached starts are expected to 8 6 4 2 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 Single Family Starts - Calgary Multi Family Starts - Calgary Forecast improve, while a pull-back is expected in multifamily starts. Economic conditions are expected to improve, easing inventory pressure, but rebalancing in the multi-family market will take time, as demand slowly catches up with supply in the market. 17 18 19 Source: CMHC, Conference Board of Canada Forecast CREB 218 CALGARY ECONOMIC AND HOUSING OUTLOOK 15
HOUSING MARKET ACTIVITY RESALE Sales and New Listing Growth 6% 4% Total Residential Following two years of slower activity, 217 marked a year of transition in the housing market. Calgary moved from an environment of price easing to general stability driven by the detached and attached sectors of the market. 2% % -2% -4% 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 Trended New Listing Growth Trended Sales Growth Source: CREB This was consistent with a general economic climate that started to stabilize after adjusting to the decline in oil prices. During the transition year, housing sales growth went from strong gains over the first half of the year, as consumer confidence improved due to some pent-up demand returning to the market, to slower sales growth in the second half the year, which was more in line with current economic conditions. Price Forecast Residential 7% 6% 5% 4% 3% 2% 1% % -1% $5, $45, $4, $35, $3, $25, $2, $15, $1, $5, Improved consumer confidence encouraged more sales activity, but it also started to translate into rising listings, as many sellers also waited to list their home until market conditions improved. The result was citywide prices that remained comparable to the previous year. -2% 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 18 $ Benchmark Price Growth Benchmark Price Annual Price Growth Anunual Benchmark Price Forecast Source: CREB 16
Improving economic conditions in 218 are expected to support modest demand growth. However, rising interest rates and stricter lending conditions will have some counterbalancing effects on that demand. The net effect is no significant changes to market conditions this year, as the presence of these opposing forces will likely prolong the period of recovery. Citywide sales are expected to reach 18,853 units, similar to levels achieved last year. Further gains in higher-density new listings will balance out with easing new listings in the detached sector, preventing any significant changes in the number of new listings coming onto the market. This should help ease the upward pressure on inventory levels and support a slow shift towards more balanced conditions. Despite expectations for the overall market, as we move through the year there is likely to be some bumpiness, as both purchasers and sellers navigate through impacts of the changes. During the period of adjustment, we are likely to experience pockets of the market that are not balanced, creating divergent price trends. We anticipate citywide prices will remain relatively unchanged this year, as sufficient supply levels combined with rising rates increased costs and slow wage growth are expected to place limits on price growth. While price trends are expected to vary by product type and price range, full price recovery is not expected to occur in 218. Months of Supply Forecast Price Comparison 12% 1% 8% 6% 4% 2% % -2% -4% -6% -8% 8 7 6 5 4 3 2 1 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 Trended Detached Trended Semi-Detached Trended Apartment Trended Row 214 215 216 217 218 Source: CREB Detached price growth Apartment price growth Attached price growth Forecast Source: CREB CREB 218 CALGARY ECONOMIC AND HOUSING OUTLOOK 17
HOUSING MARKET ACTIVITY DETACHED Sales by Price Range Detached 6, 5, 4, 3, 2, 1, <$3, $3, - $399,999 $4, - $499,999 $5, - $599,999 $6, - $699,999 $7, - $999,999 $1,,+ 29 21 211 212 213 214 215 216 217 Source: CREB The detached sector has generally seen fewer price declines compared to the other segments of the market throughout the recession. Demand eased for this product throughout the recession, but it did not experience the same supply pressure from competing new-home construction. This prevented the months of supply from reaching previous highs, unlike other sectors of the market. Detached sales in 217 totaled 11,831 units, 5.6 per cent above 216 figures, but nine per cent below long-term trends. Sales improved, but most of the growth occurred in the first half of the year. This is likely a result of some of the pent-up demand in the market. By the third quarter, sales started to ease, with year-to-date totals at levels more in line with economic fundamentals. Fourth quarter sales resumed their growth, due to improved confidence in the market and many consumers looking to enter the market prior to the new mortgage rule changes taking effect. Supply did not keep pace with the early rise in demand in 217. This resulted in stronger price gains throughout the first portion of the year. However, as supply levels rose in response to improving prices and demand, the pendulum swung the other way. This elevated months of supply and put downward pressure on prices. Despite the dynamics throughout the year, detached benchmark prices averaged $54,867 in 217,.63 per cent higher than last year. CREB 218 CALGARY ECONOMIC AND HOUSING OUTLOOK
Inventory by Price Range Detached 1,4 1,2 1, 8 6 4 2 <$3, $3, - $399,999 $4, - $499,999 $5, - $599,999 $6, - $699,999 $7, - $999,999 $1,,+ 29 21 211 212 213 214 215 216 217 Source: CREB Moving forward, changes in lending criteria and higher rates are likely to have more of an impact on the detached sector. Sales activity is expected to slow by 1.3 per cent, as demand eases from some of the move-up buyers, and some purchasers are pushed into more affordable sectors of the market. However, more significant declines are not expected, as the changes should be mitigated by availability of supply in the lower price ranges, as well as general improvements in the overall economic situation. In 218, we anticipate seeing further shifts in the distribution of sales, likely impacting average and median prices. Prior to November 217, sales activity in the detached sector improved mostly in the upper price ranges. However, as of November, there appeared to be a shift occurring towards improved growth in the lower price ranges of the market. Other factors influencing the distribution of detached sales to more affordable product can be related to employment growth in traditionally lower-paying sectors. While demand shifts in this sector, new listings are also expected to ease, as some existing homeowners will be adjusting their expectations. This should help ease the upward pressure on inventories and support more balanced conditions. During the transition, pockets of over/under supply may arise, creating divergent trends in pricing. We anticipate there will be some price softness for higher-priced product, while lower-priced homes may see modest price improvements. The overall effect is expected to translate into no significant changes in citywide detached benchmark prices. However, shifts in distribution to more affordable product should cause some downward pressure on average and median prices. CREB 218 CALGARY ECONOMIC AND HOUSING OUTLOOK 19
HOUSING MARKET ACTIVITY ATTACHED Price Growth Comparison 8% 7% 6% 5% 4% 3% 2% 1% % -1% $5, $45, $4, $35, $3, $25, $2, $15, $1, $5, The increased popularity of this type of product has also caused more development of this style of home, and new listings also improved. However, the growth in sales outpaced the growth in new supply. This limited upward pressure on inventory levels and caused the market to trend towards more balanced conditions. Annual benchmark price appreciation reached four per cent for a total of $42,6, bringing prices to levels comparable to pre-recession highs. Sales growth for row properties was also -2% 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 $ 17 exceptionally strong, but prices have not been as resilient in this sector of the market compared Semi-detached Price Growth Row Price Growth Semi-detached Price Row Price Source: CREB to the semi-detached product. Row sales in 217 totaled 2,359 units, a 1 per cent increase over The attached segment of the market is comprised of semi-detached-style properties and row units, and has seen the largest rise in sales activity in 217. Attached sales increased by 8.2 per cent for a total of 4,182 units in 217. Sales growth was strong for both the semi-detached and row-style properties. Attached housing has been appealing to those who are looking for a more affordable option than the detached segment in the community they may be considering. This market is now accounting for 22 per cent of all residential sales, compared to the 2 per cent average over the last decade. Semi-detached sales totaled 1,823 units in 217, which is a six per cent improvement over the activity recorded last year. It was also nearly 1 per cent higher than the 1-year average, and the only segment to see a rise in that metric. last year, but still seven per cent below longerterm averages. Despite the rise in sales, new listings growth prevented significant reductions in inventory levels. This caused months of supply to remain elevated at 4.4 months. This was an improvement over last year, but this segment continued to favour the buyer, causing further downward pressure on prices. Annual row benchmark prices averaged $299,567 in 217, three per cent below last year and nine per cent below recent highs. As supply in this segment of the market falls into more affordable categories, we anticipate further demand shifts to attached properties in 218. Improving sales, relative to listings, should cause further reductions in inventory levels and generate modest improvements in prices. This is primarily driven by improvements in semidetached prices, while row prices are expected to start to stabilize this year. 2 CREB 218 CALGARY ECONOMIC AND HOUSING OUTLOOK
HOUSING MARKET ACTIVITY APARTMENT The impact of the recession was most significantly felt throughout the apartment condominium sector. A decline in sales, coupled with rising inventory in the new-home, resale and rental markets, resulted in more supply than demand. Sales activity in 217 improved by over five per cent over 216, but the continuing rise in new listings resulted in inventory levels averaging 1,62 units, just below average peak levels of 1,669 units recorded in 28. The additional supply had clear implications for pricing. The annual benchmark price in 217 totaled $263,475, four per cent below last year and 12 per cent below annual highs recorded in 214. activity may improve and some of the new listing pressure may ease, it will take time for inventory levels to decrease. On this basis, this segment is expected to continue to remain favourable for buyers for most of the year, placing further downward pressure on prices. Overall, apartment benchmark prices are expected to total $26,832, another one per cent decline over last year s prices. Inventory 2,5 2, Apartment Availability of rental product and easing rental rates put some limits on demand growth. Purchasers did not have to rush into any decisions regarding ownership. Easing rents and higher vacancy levels also prevented some consumers from purchasing condos as an investment property. Many new condominiums became available in the market, increasing supply. Condominium apartments made up nearly 6 per cent of new multi-family inventory levels this year. The additional supply caused many builders to offer various incentives to entice buyers into new product over resale. Rising interest rates and changes in lending requirements could make this product more attractive to potential purchasers. However, competition from new product will prevent more significant gains in resale market sales. New construction for multi-family product is expected to ease in 218, limiting the upward pressure on total supply. However, supply levels in both the resale and new-home market are expected to remain elevated in 218. While sales 1,5 1, 5 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 Months of Supply 12 Month Trend Benchmark Price and Growth 8% 7% 6% 5% 4% 3% 2% 1% % -1% -2% -3% 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 16 17 Y/Y % Change Benchmark Price Benchmark Price Source: CREB Apartment $35, $3, $25, $2, $15, $1, $5, $ Source: CREB CREB 218 CALGARY ECONOMIC AND HOUSING OUTLOOK 21
DISTRICT SUMMARY DISTRICT MAP North West CITY OF CALGARY North North East Citywide trends have been demonstrating the slow recovery of the housing market, but activity can vary significantly within communities and districts: Overall, detached prices recorded modest growth, but this was not the case across all districts. Modest price declines occurred in the North East, North, South and East districts of the city. Some of this decline is related to the additional supply coming from the competing new-home sector. The strongest annual growth occurred in the West and City Centre districts. Despite some price shifts, all districts, except for the West district, have prices that remained below previous highs. The West district recorded the largest decline in inventory levels. This pushed that West City Centre East segment of the market into more balanced conditions relative to longer-term averages, supporting stronger price growth this year. The apartment sector saw price declines across all the districts, as every area faced more supply then demand. Attached sector prices eased in all districts except for the City Centre, which recorded annual price South South East gains of nearly four per cent. Attached prices improved in the City Centre this year, but, overall, they remained over three per cent below recent highs. As our market recovers, we anticipate divergence between districts will persist. Price growth will be dependent on supply in the resale market and competing supply in the new-home sector. 22 CREB 218 CALGARY ECONOMIC AND HOUSING OUTLOOK
217 Sales Sales Growth New Listings New Listings Growth Sales to New Listings Ratio Inventory Average Months of Supply Benchmark Price Yearover-year Benchmark Price Change Change Form Maximum Annual Price Share of Total Segment Sales DETACHED City Centre 1,29 11.% 2,248 7.6% 57% 378 3.52 $682,892 2.45% -4.33% 1.9% North East 1,297-2.% 2,489 7.7% 52% 389 3.6 $383,533 -.89% -2.55% 1.96% North 1,619 3.1% 2,755 14.1% 59% 411 3.5 $439,35 -.13% -3.18% 13.68% North West 1,746 4.7% 2,568 5.5% 68% 31 2.13 $544,725.3% -4.93% 14.76% West 1,325 8.2% 2,128 2.9% 62% 31 2.72 $726,267 4.32%.% 11.2% South 2,418 1.5% 3,682 8.3% 66% 511 2.53 $476,592 -.33% -4.94% 2.44% South East 1,77 3.3% 2,667.1% 66% 369 2.5 $449,35.44% -3.92% 14.96% East 369 3.4% 565 7.6% 65% 81 2.63 $354,25 -.5% -3.33% 3.12% TOTAL CITY 11,831 5.6% 19,95 6.6% 62% 2,751 2.79 $54,867.63% -3.3% 1.% APARTMENT City Centre 1,338 3.2% 3,527 2.5% 38% 794 7.12 $289,65-3.51% -11.72% 46.64% North East 11-6.5% 369 2.6% 27% 86 1.27 $233,592-4.18% -12.81% 3.52% North 167 9.9% 425 21.8% 39% 91 6.5 $219,1-5.6% -16.% 5.82% North West 285 12.6% 611 2.3% 47% 128 5.38 $243,492-3.64% -8.98% 9.93% West 313 8.3% 74.6% 44% 152 5.82 $252, -2.44% -1.67% 1.91% South 356-6.8% 879 1.2% 4% 198 6.66 $234,68-5.71% -12.51% 12.41% South East 237 3.9% 56 3.9% 47% 15 5.31 $247,68-4.8% -11.91% 8.26% East 72 14.3% 195 4.3% 37% 48 8.1 $196,525-6.15% -2.49% 2.51% TOTAL CITY 2,869 5.3% 7,215 3.9% 39.76% 1,62 6.7 $263,475-3.97% -11.76% 1.% SEMI-DETACHED City Centre 542 6.7% 1,81 4.4% 5% 196 4.34 $763,4 7.35% -.12% 29.73% North East 197 1.5% 369 7.6% 53% 63 3.84 $294,842-3.73% -6.73% 1.81% North 192 23.1% 263 8.2% 73% 36 2.27 $32,342-1.69% -4.75% 1.53% North West 193 7.2% 317 7.1% 61% 47 2.91 $396,583 8.13% -1.51% 1.59% West 173 4.2% 295-2.3% 59% 49 3.43 $517,975 6.14% -.12% 9.49% South 267 13.1% 43 8.6% 66% 57 2.54 $329,55-4.41% -7.6% 14.65% South East 19-1.% 26-13.9% 73% 39 2.43 $323,858 3.31% -.97% 1.42% East 7 1.4% 146 16.8% 48% 29 5.1 $293,625-1.86% -3.99% 3.84% TOTAL CITY 1,823 6.% 3,131 3.8% 58.22% 516 3.4 $42,6 3.98% -.41% 1.% ROW City Centre 41 8.4% 887 5.6% 45% 168 5.2 $472,533 2.97% -4.82% 17.% North East 215.5% 545 24.7% 39% 14 5.81 $211,167-2.73% -1.52% 9.11% North 334 16.4% 598 6.% 56% 18 3.87 $261,78-2.11% -8.62% 14.16% North West 294 11.4% 537 8.% 55% 91 3.72 $31,133-3.27% -1.4% 12.46% West 31 2.9% 6 2.9% 5% 19 4.36 $347,875-1.45% -7.68% 12.76% South 414 8.4% 774 3.2% 53% 141 4.1 $27,25-2.96% -8.23% 17.55% South East 329 3.1% 61 -.5% 54% 115 4.18 $295,517-1.14% -7.33% 13.95% East 74 23.3% 143 19.2% 52% 3 4.82 $183,675-4.71% -17.75% 3.14% TOTAL CITY 2,359 1.% 4,689 6.5% 5.31% 866 4.4 $299,567-2.95% -9.% 1.% TOTAL RESIDENTIAL City Centre 3,571 7.% 7,743 4.56% 46% 1,536 5.16 $56,342.46% -6.99% 18.91% North East 1,81-1.6% 3,772 11.1% 48% 643 4.26 $353,942-1.9% -3.13% 9.59% North 2,312 6.8% 4,41 13.16% 57% 646 3.35 $395,4 -.62% -4.47% 12.24% North West 2,518 6.5% 4,33 5.47% 62% 576 2.74 $475,792 -.31% -5.48% 13.34% West 2,112 9.5% 3,727 2.3% 57% 611 3.47 $559,867 2.75% -2.2% 11.19% South 3,455 8.4% 5,738 6.46% 6% 96 3.15 $412,5-1.51% -6.5% 18.3% South East 2,526 4.2% 4,43 -.59% 63% 627 2.98 $423,55 -.8% -4.8% 13.38% East 585 6.6% 1,49 9.61% 56% 188 3.85 $32,817-1.36% -4.65% 3.1% TOTAL CITY 18,882 6.1% 34,13 5.77% 55% 5,734 3.64 $437,88 -.17% -5.3% 1.% *District sales may not match total city sales, as some areas within the city limits are not an official community located within a specific district.
REGIONAL MAP SURROUNDING AREA Mountain View Cremona Didsbury Carstairs Cochrane Rocky View Bragg Creek Redwood Meadows Turner Valley Black Diamond Airdrie Calgary Foothills Chestermere High River Heritage Pointe Okotoks Cayley Beiseker Irricana Langdon Blackie Strathmore Wheatland Vulcan Vulcan 24 CREB 218 CALGARY ECONOMIC AND HOUSING OUTLOOK
TYPICAL HOME ATTRIBUTES & PRICE - DETACHED HOMES 217 Year-to-date Detached Benchmark Price Year-over-Year Price Change Per cent Change from Peak Price Gross Living Area (Above Ground) Year Built Lot Size Airdrie 377,458 -.58% -3.86% 1,39 22 4,653 Cochrane 42,583 -.83% -5.9% 1,494 1998 5,52 Chestermere 495,217.89% -9.84% 1,871 23 5,511 Okotoks 429,733 -.86% -4.41% 1,437 21 5,37 Strathmore 397,1 8.61%.% 1,252 2 5,583 City of Calgary 54,867.63% -3.3% 1,341 1991 4,98 The areas surrounding the city of Calgary are influenced by economic conditions similar to those in the city. Supply in the new-home markets Share of Sales 217 1% in these areas often places a greater weight on resale pricing and each area has its own unique dynamics to consider. The smaller size of some of these markets can result in more variability within the data. We often focus on the larger centres 6% 6% 2% 2% 5% Calgary Airdrie Rocky View Region Foothills Region within the surrounding area. Mountain View Region The surrounding area makes up 22 per cent of 78% Wheatland Region OtherActive Areas total regional sales, with most of the activity occurring in Airdrie, Cochrane and Okotoks. Overall sales activity in surrounding areas totaled 5,334 units in 217, a 3.7 per cent improvement over the previous year. This is five per cent above Source: CREB, 217 long-term averages. New listings growth exceeded the growth in sales, causing overall gains in inventory levels and putting further downward pressure on pricing. Much like the different districts across Calgary, not all surrounding areas faced price declines. For example, Strathmore recorded stronger price growth than other areas and prices have returned to levels comparable to recent highs. Price growth will ultimately depend on: The supply of product in the resale area. The competing new-home market. The supply availability within Calgary, along with other surrounding areas. As economic conditions improve and affordability continues to be a factor, many of these areas should see continued improvement in their local housing markets. CREB 218 CALGARY ECONOMIC AND HOUSING OUTLOOK 25
AIRDRIE Airdrie Sales Activity 1,8 1,6 1,4 1,2 1, 8 6 4 2 Detached Row 7 8 9 1 11 12 13 14 15 16 17 Apartment Semi-Detached 1 Year - Average Source: CREB Sales activity in Airdrie totaled 1,329 units in 217, comparable to last year s levels. Increased competition from the new-home sector, along with more supply in lower price ranges within Calgary, likely prevented strong sales growth in Airdrie. Unlike Calgary, when considering annual sales activity in Airdrie, 217 levels remain comparable to activity over the past five years, with the exception of 214 s record-high levels. In addition to the lifestyle choices that Airdrie provides, the smaller city generally benefits from having product that is more affordable compared to homes within Calgary. Airdrie Inventory 6 5 4 3 2 1 Total Residential The average benchmark price for a detached home in Airdrie is $377,458, compared to $54,867 in Calgary. This is also the case for both attached and apartment product, where the difference in the attached and apartment sectors are over $8, and $6,, respectively. The average annual benchmark price in Airdrie totaled $348,958 in 217, 1.1 per cent below last year s levels. Detached Row 7 8 9 1 11 12 13 14 15 16 17 Semi-Detached Inventory Trend Apartment Source: CREB Rising supply in the new-home and resale sectors likely weighed on prices. The price adjustments seemed to be more pronounced in the attached segment of the market, driven by declines in row pricing. Rising inventories in the new-home market caused some price adjustments in that sector, adding downward price pressure to the resale market. 26 CREB 218 CALGARY ECONOMIC AND HOUSING OUTLOOK
Months of Supply and Price Changes - Airdrie Total Residential 1 9 8 7 6 5 4 3 2 1 7 8 9 1 11 12 13 14 15 16 17 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % -1% -2% Months of supply 12 month trend Y/Y benchmark price change Source: CREB Starts activity in the area has been easing, which should limit some of the upward pressure on supply in this market. At the same time, Airdrie should benefit from its relative affordability in the detached market. This should help push this market towards more balanced levels, generating more stability in prices in 218.
OKOTOKS Okotoks Benchmark Price and Growth 6% 5% 4% 3% 2% Detached $6, $5, $4, $3, Sales activity in Okotoks remained comparable to levels achieved last year and below long-term averages. New listings also remained similar, keeping months of supply relatively stable. With no significant changes to the market and months of supply remaining slightly higher than longerterm averages for the town, annual benchmark prices eased slightly over the previous year. 1% % -1% $2, $1, Detached benchmark prices averaged $429,733 in 217, nearly one per cent lower than last year and four per cent below recent highs. Starts -2% 7 8 9 1 11 12 13 14 15 16 17 $ activity in Okotoks improved in 217, causing a rise in new-home inventories. Y/Y % change benchmark price Benchmark price Source: CREB The additional supply is likely placing some limits on resale price recovery in the market. Overall, improving economic conditions will likely prevent easing sales, but the impact on prices in Okotoks will continue to be influenced by any supply pressures coming from the new-home sector.
COCHRANE The town of Cochrane recorded a 12 per cent rise in sales in 217 for a total of 663 units. This is above last year s levels and above average levels over the past five years. It was the second highest year on record compared to activity in 214. Cochrane Months of Supply 25 2 Total Residential The growth in sales was also accompanied by a rise in new listings, which reached new record highs, causing further inventory gains. Strong sales helped cause some downward pressure on the months of supply, which went from an average of 5.8 in 216 to 5.4 in 217. 15 1 5 Overall, total residential benchmark prices in Cochrane averaged $421,633 in 217, just below last year s levels of $424,617. 7 8 9 1 11 12 13 14 15 16 17 Months of Supply 12 Month Tend Source: CREB The decline was mostly due to easing in detached home prices, as attached home prices improved slightly over the previous year. Higher starts and inventory of new product impacted prices in the resale market, as seen in other areas. Prices for new product eased, adding competitive pressure for the resale market and limiting the potential for price recovery in this market. Cochrane Benchmark Price and Growth 6% 5% 4% 3% 2% 1% % -1% -2% Total Residential $6, $5, $4, $3, $2, $1, -3% 7 8 9 1 11 12 13 14 15 16 17 $ Y/Y % change benchmark price Benchmark price Source: CREB CREB 218 CALGARY ECONOMIC AND HOUSING OUTLOOK 29
NOTES 3 CREB 218 CALGARY ECONOMIC AND HOUSING OUTLOOK
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