Housing affordability continues to improve in Calgary market

Owning a home in Calgary at market price remains more affordable than it has been on average since the middle of the 1980s, says a new report released Monday by RBC Economics Research.

But the latest Housing Trends and Affordability Report said movements in oil prices are likely to exert a stronger influence on the market direction in the short term.

“Alberta’s housing market is still feeling the impact from the oil price shock,” said Craig Wright, senior vice-president and chief economist, RBC. “That said, the dust began to settle this spring, and we saw a gradual recovery in confidence, which helped rebalance demand-supply conditions. Home re-sales started to turn around, and sellers no longer rushed to list their properties.”

RBC said prices remained under slight downward pressure for the most part in the second quarter, which helped keep the cost of home ownership in the province on a descending course from the first quarter.

The RBC Housing Affordability measures, which capture the proportion of pre-tax household income needed to service the costs of owning a home at market values, fell slightly in Calgary for both two-storey homes, by 0.8 percentage points to 31.9 per cent, and bungalows, by 0.4 percentage points to 32.4 per cent. The measure for condos stayed relatively the same, rising by 0.1 percentage points to 19.5 per cent.

Across the province, the measures fell 0.5 percentage points to 32.5 per cent for two-storey homes and 0.1 percentage points to 31.7 per cent for bungalows, while rising 0.2 percentage points to 20.1 per cent for condos.

In the second quarter, RBC said national affordability measures rose by 0.7 percentage points to 43.3 per cent for bungalows and by 0.4 percentage points to 48.3 per cent for two-storey homes. The measure for condominiums remained unchanged at 27.1 per cent.

RBC’s Housing Affordability measure for the benchmark detached bungalow in Canada’s largest cities was: Vancouver 88.6 (up 3.0 percentage points); Toronto 59.4 (up 2.1 percentage points); Montreal 36.0 (down 1.2 percentage points); Ottawa 35.4 (unchanged); Calgary 32.4 (down 0.4 percentage points); Edmonton 32.5 (down 0.4 percentage points).

“With home resales beginning to turn around and sellers no longer rushing to list their properties in the spring, there was evidence that confidence slowly returned to the Alberta market in the second quarter following the hard blow delivered by the oil price plunge in the previous two quarters,” said the report.

“These developments helped rebalance demand-supply conditions; however, prices still remained under slight downward pressure for the most part in the second quarter, thereby contributing to keep the cost of home ownership on a generally downward course in the province.”

It said recovery in oil prices in the second quarter boosted buyers’ confidence to jump back in play and reduced sellers’ eagerness to get out.

“However, this boost to market sentiment may be short lived if a resumption of the slide in oil prices in the third quarter persists,” it said.


-Calgary Herald

Alberta housing market forecast to rebound in 2016

After a tough year in 2015, Alberta’s resale housing market is expected to rebound in 2016, according to a report by RBC Economics.

The bank’s senior economist, Robert Hogue, is forecasting sales in the province to dip by 17.8 per cent this year from 2014 to 59,000 transactions — the largest drop in the country.

But Alberta is then expected to see the biggest year-over-year hike in sales in 2016 of 7.1 per cent to 63,200 units.

Despite the drop in sales this year due to a slumping economy and continued depressed oil prices, the average sale price in Alberta is forecast to climb by 0.7 per cent to $378,500 and grow by another 2.1 per cent next year to $386,600.

Hogue said the 2016 sales forecast is elevated because it is compared to the steep decline overall in 2015.

“I wouldn’t necessarily call it a turnaround. It’s just that the depth of the correction in the early part of 2015 was so deep . . . We’ve seen home sales pick up slightly since the winter and we think that going forward it’s going to be about stable or might increase a bit,” he said.

The forecast is based on RBC assumptions for the price of West Texas Intermediate crude oil at $52 US a barrel this year and $72 in 2016. In recent days, that price has ranged between $40-$41.

Hogue said the market has rebalanced in Alberta with sales picking up and new listings easing off from their levels earlier this year.

New home construction is going to feel the economic pinch in the next two years. Hogue is calling for an annual decline in Alberta of 12 per cent in 2015 to 35,700 units followed by another 15.1 per cent decrease in 2016 to 30,300 units.

At the national level, the RBC report said the number of resales in the country would jump by five per cent this year to 505,400 but drop by 0.7 per cent next year to 501,800.

Hogue is expecting the national average price to rise by 4.6 per cent this year to $392,600 and by 3.2 per cent in 2016 to $405,100.

As for housing starts, Canada will mirror what is happening in Alberta but at a lesser scale. Starts this year are expected to drop by 1.9 per cent year-over-year to 185,800 units and fall by another 2.1 per cent next year to 181,500 units.

According to the Canadian Real Estate Association, year-to-date until the end of July, MLS sales in Alberta are down by 20.5 per cent from the same period a year ago to 35,986 and the average sale price has dipped by 0.9 per cent to $397,412. New listings of 71,358 are down 3.3 per cent.

In Canada, MLS sales have risen by 5.9 per cent to 314,736 units and the average sale price has increased by 8.5 per cent to $441,945.


-Calgary Herald