Homes sales set to fall, says RBC

The number of homes being bought and sold in Alberta is forecasted to plummet in 2015, according to a report by RBC, but this decline is great news for investors in the province.

"There is fear in the marketplace and since most people only read headlines, they won't understand that all this means is that not as many houses will move hands," explained Tiffany Young of AlbertaOnFire Investor Team.  

The Royal Bank of Canada revised its 2015 forecast on Monday, in light of plunging oil prices, the Bank of Canada’s surprise interest rate cut and the substantial depreciation in the Canadian dollar.

It forecasted that, in Alberta, the number of homes being bought and sold will drop to 60,500 in 2015, from 71,800 in 2014, a decline of 16 per cent and the biggest since a 12 per cent drop in 2008.

The bank predicted that house prices in Alberta will fall 0.5 per cent to an average of $370,600, the most since a 6.5 per cent drop in 2009.

"If you look closer, [RBC] says they don't know if it will result in lower prices and, if it does, [it] only expects a 0.5% drop," added Young. "This means that the general market will be afraid, but as investors we know it won't affect home prices very much. Homeowners looking to sell will be a little more motivated to give us terms and conditions we want."

The revised forecast does show a slight increase, of 1.7 per cent in overall home resales in Canada, to 489,500 units in 2015, despite the notable declines expected in Alberta (16 per cent), Saskatchewan (nine per cent) and the Atlantic region (one per cent).

RBC expects gains in British Columbia (10.5 per cent), Ontario (4.7 per cent) and Quebec (3.4 per cent).

“The revision mainly reflects the lower anticipated trajectory for interest rates, which we believe will continue to stimulate homebuyer demand in net oil-consuming provinces in 2015,” senior economist Robert Hogue said in the report.

“On the other hand, the downgraded oil price assumptions for 2015 are seen to weigh more significantly on economic growth and housing demand in Alberta, Saskatchewan, and Newfoundland and Labrador.”

The report also stated that the housing outlook for 2016 remains challenging. It said it continues to anticipate a rise in interest rates, which would contribute to deterioration in housing affordability and weigh on housing demand.

"The trend for 2015 will be uncertainty," said Wayne Weum, an investor based in Edmonton. "Investors need to do their due diligence, focus on the endgame and hunker down for the long term."

To find out about the current median home prices, capital growth and demographics across Canada, check out CREW's Investment Hotspot tool.
 

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COMMENTS

  • by Jill Lubinski 2015-02-11 1:25:33 PM

    You do know "if it bleeds, it leads" right? Journalistic mantra….

  • by gerry jones 2015-02-13 2:18:48 PM

    The media makes the lawyers look honest

  • by belinda lelli 2015-02-13 2:26:07 PM

    Why do you insist on publicizing negative garbage - obviously, to attract attention; the media will be blamed should there be a recession - the majority of the public only reads headlines and listens to talk 680. Shame on you for feeding them a bunch of misguided crap. I will no longer subscribe to you

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