Dropping house prices could impact rental rates

One real estate analyst is expecting continued low house prices in Calgary, adding that he also anticipates that vacancy rates will rise, bringing down rental rates – a bad combination for investors.

“The drop in oil prices, which brought layoffs and lower consumer confidence, have been the largest factor in today's market conditions,” Don Campbell, a senior real estate analyst the Real Estate Investment Network (REIN) told CBC News. “Prices held steady due to a lack of real desperation to sell.”

But Campbell also says there are two other major factors keeping a cap on house prices – the growing population in the region before oil prices went south and the rental market.

“These new citizens have supported both the housing resale market as well as the rental market,” he said, adding this is directly connected to the second factor – high rents and low vacancy rates in the region.

Campbell suggests that if homeowners had been thinking of selling their home but wanted to stay in the city, they discovered it was actually cheaper to stay put.

“This lack of next home lowered the motivation level of those who listed their property and thus many were willing to stand firm on their price, which in turn stabilized the average sale price,” he said.

But Campbell says Calgary buyers should expect even lower house prices to emerge with increased motivation from November 2015 to February 2016, with more vacancies but oil prices still remaining low. 

Campbell says mixed signals will continue in 2016 if oil prices continue to stay under $50, which will result in lower house prices and a drop in demand for luxury properties.

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