Going into 2023, the Calgary Real Estate Board, or CREB released its 2023 Forecast Report. This 24-page detailed report covers not only its predictions for real estate in the YYC area for 2023 but also the impactors of those anticipated trends.
Interest Rate: The Great 2023 Impactor
Off the hop, the first discussion point was one that is on the lips of REALTORS ®, Mortgage Brokers, families, and investors alike-- the interest rate.
Since it's been a heavily discussed topic both in practice and throughout Canadian Real Estate Wealth's content, I won't belabour it too much but to mention that inflation in 2022 faced by Canadians, like the rest of the world, has triggered significant rate hikes from the Bank of Canada.
At the beginning of the year the Bank of Canada's rate was 0.25 percent. With persistent announcements, Canadians saw a rate climb to 4.25 percent by the end of 2022.
One of the most notable 2022 predictions made by CREB was the following, "While economic growth is expected to slow, forecasters are not calling for a recession in the province [of Alberta]. At the same time, the strong flow of migrants to the province, along with job growth concentrated in generally higher-paid industries in Calgary is expected to offset some of the impacts that higher lending rates are having on the housing market."
We tapped trusted Real Estate Broker, namesake, and leader of the Jesse Davies Team, Jesse Davies for his expertise on whether the Calgary Real Estate Board's prognostication is correct or off the mark. Davies shared with the Canadian Real Estate Wealth readership the benefit of his keen observations and 15 years of experience:
“I couldn’t agree more the Calgary market is performing very well given the circumstances of a high-interest rate environment in a very short amount of time. It's almost a positive for the affordable Calgary market as buyers are having a hard time affording the escalated prices in other major markets in a high-interest rate environment.”
A contentious supposition made in CREB's 2023 Forecast Report is that the decline in real estate sales that panged Calgary in 2014 due to a dramatic drop in energy costs and consequent wide-spread job loss, the exit of migrants and 'economic contraction' actually helped the City to fair better than other major cities in Canada due to a comparative surplus of housing inventory.
The Report posited that "While Calgary and Edmonton are not immune to the impacts of inflation and higher lending rates, they have not experienced the same level of price gains and are not expected to go through the same level of declines…thanks to higher commodity prices, a shift in interprovincial migration and relative affordability, Alberta is not expected to face the adjustments as other parts of the country."
The Numbers In The Report Seem To Support CREB's Hypothesis
A comparison of major cities' average housing prices from 2014 to 2022 breaks down as such:
- Greater Vancouver: 2014-$691,558 versus 2022: $1,199,242 which is a 38% increase.
- Greater Montreal: 2014: $280,317 versus 2022: $528,083 which is a 46% increase.
- Greater Toronto: 2014: $536,508 versus 2022: $1,195,950 which is a 55% increase.
- Greater Calgary: 2014: $438,875 versus 2022: $516,625 which is a 15% increase and Edmonton: 2014:$349,575 versus 2022:$389,725 which is a 10% increase.
In other words, the pendulum cast by the Covid-19 global pandemic swung less acutely in Alberta than in other major urban centres in the Great White North.
The Marriage Between Employment and Real Estate
Employment and real estate go together like horses and chuckwagons.
CREB's prophecy heading into 2023 for employment rates was as such, "Job growth is expected to slow in 2023 to one percent. However, previous gains in professional jobs and further gains in the sectors such as healthcare should continue to support a relatively stronger housing market."
We turned once again to Jesse for his careful retrospective analysis regarding whether that's the trend that's currently in play for Calgary and the surrounding area's employment and if employment is a good key performance indicator of real estate trends.
Here are his thoughts:
“I think Calgary employment should do well. Calgary has done its best to move away from being so dependent on the oil & gas market. This strategic diversification has been a good buttress and will continue to provide support. The affordable commercial building rates coupled with affordable housing for employees have been attracting a lot of corporations to the city. I think Immigration from other provinces and countries is going to keep the housing demand strong.&rdquo
Build and Scale With A Little Help From Friends
It may be hard to get behind the notion that building new construction homes will have a positive impact on the national or even provincial or local economy. The Report differentiated between apartment-style new construction and the building within the new detached market when it noted:
"While some of the supply challenges are expected to be addressed by the new home sector, there is no indication that current construction levels relative to the population size will create a scenario where we will see too much supply come onto the market. This is especially the case with apartment-style products, where nearly half of the total starts this year are intended for the rental market. At the same time, new supply in the detached market tends to be at a higher price point providing limited supply relief for lower-priced detached homes. The larger concern is that the supply levels remain exceptionally low relative to demand which could prevent home prices from stabilizing this year."
Perhaps this was not known by CREB at the time of their abovementioned prediction, it's important to highlight a major announcement impactor at the Federal and Provincial level that some tout as a game changer for Calgary's real estate sector.
On March 9th, 2023, the Canadian and Albertan Governments respectively jointly announced 54 million dollars in funding towards seventeen affordable-housing projects around the wild-rose-country province. This announcement comes as a part of the Federal government’s National Housing Strategy and the province of Alberta’s Affordable Housing Partnership Program.
Canadian Real Estate Wealth leaned on Real Estate Broker Jesse Davies one last time for his insight on what this announcement means for real estate trends in Calgary.
Here is what he had to say on the subject:
“Lack of supply is a major concern for the Alberta market and one of the main reasons most sectors continue to see increases in prices month over month is because supplies are at all-time lows. The affordable housing initiative should help alleviate some of the rental crunches we have been seeing especially in the affordable price ranges. Historically the qualifying parameters are very limited to qualify.”
It seems like the Calgary Real Estate Board's 2023 Forecast Report, was unable to predict all measure of trends and their corresponding impactors. CREB did, however, turned its mind towards careful contemplation to provide a supported and strategic hypothesis as to the real estate outlook for 2023. The past 3 years have told us that the most unpredictable of things can harangue even the most thoughtful of analyses and can be far-reaching. We feel that barring that CREB upholds its reputation of providing consumers with solid, accurate information upon which they're able to make informed decisions.