Calgary & Region Yearly Outlook Report
Calgary & Region Yearly Forecast
Lifted Lending rates are expected to weigh on sales in 2023, bringing levels lower from the recorded high in 2022. Although, with forecasted sales of 25,921 in 2023, levels are still anticipated to be above the activity recorded before the pandemic. More recent growth in migration and employment is expected to help offset the impact of higher lending rates, securing annual sales action higher than levels succeeded throughout the 2015 to 2019 period.
Growth in newer listings in 2022 was not nearly enough to offset the gains in sales and supply levels have continued to stay low, especially for lower-priced products. The higher lending rates are also expected to weigh on listings growth in 2023 as it has become more difficult for a move up buyer. Although improved starts are expected to support supply growth, thanks to the heavy migration levels, supply levels are not expected to record significant gains.
The low starting point and limited upward pressure on supply in 2023 is expected to put a stop to any significant downward pressure on prices as demand will begin to normalize. Still, conditions are expected to vary depending on price range and property type. More higher-priced homes will see some downward price pressure as the segment of the market is not experiencing the same supply constraints. But, supply lowers relative to sales for lower priced properties are expected to remain supporting modest price growth. Declines in the higher end of the market are expected to offset gains in the lower end of the market as residential prices in Calgary are expected to balance out in 2023.
Many factors, such as, the aftermath of the pandemic and geopolitical issues impacting global markets have left many countries facing difficulties with the inflation and the rising of interest rates. The consistent inflation in 2022 has set off significant rate rises from the Bank of Canada this year, moving from 0.25 per cent at the beginning of the year to 4.25 per cent by the end of 2022. These recent adjustments are expected to weigh on consumers and businesses in 2023 forcing the Canadian economy to slide into a recession. Although, given the tight labour market and consistent supply chain issues in some sectors of the economy, the recession in Canada is expected to be calm and short-lived.
The strength in commodities is expected to soften some of the economic dents that higher rates will have in Alberta. Although economic growth is expected to slow down, forecasters are not calling for a recession in the province. At the same time, the steady flow of migrants to the province of Alberta, along with job increase 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 are expecting to have divergent trends in the market based on the property type and price range as the market transitions away from the pandemic/low-interest rate fuelled growth. Thanks to the recorded high sales accomplished earlier in 2022, the year-to-year adjustments, especially early in 2023, will be way higher than the changes expected in the second half of 2023. The biggest risk to the forecast this year is centred around home prices.
Coast to Coast Comparison
The pandemic and extremely low lending rates contributed to the housing boom all across the country of Canada. Although the price rises in Alberta were not as powerful as in other parts of the country as we walked into the pandemic with a market that favoured the buyer.
Alberta's economy was hurting as the drop in energy prices in 2014 resulted in significant job loss, a loss of migrants and an economic contraction, all before the pandemic. By the end of the year in 2019, home prices in Calgary and Edmonton were lower than the levels recorded in 2014. Meanwhile, Canada's largest cities didn't go through the same ordeal of economic hardships and over the five-year period prices have raised a decent amount over this time. Larger centres had less supply in their markets and the sudden growth in demand forced price gains that were decently higher than what has been seen in our cities, when the pandemic hit. Calgary home prices only recovered in 2021, and while supply difficulties compared to demand did resolve in strength gains in 2022, over the pandemic period price growth was still half of what was seen in other centres.
More recent gains have had more of an impact on home sales in Toronto and Vancouver. Slowing sales in these markets have impacted the country's numbers causing many to forecast price declines in Canada. It's also important to note that even with the forecasted price declines expected in larger markets in Canada, those declines are not expected to make all the gains that occurred through the pandemic disappear. Although Calgary and Edmonton are not immune to the impacts of inflation and larger lending rates, they have not experienced that same amount of level gains and are not expected to ride the same amount of declines. Thanks to larger commodity prices, an adjustment in interprovincial migration and relative affordability, Alberta is expected to not face the shifts as other areas of the country.
Lending Rates & Inflation
Less inflationary pressure is to be expected in the year of 2023, which should deflect any significant rate gains in 2023. The Bank of Canada is not expected to lower overnight target rates until 2024, while the depth and length of a national recession can impact lending rates and inflation. However, our country could see a shortening spread on mortgage lending rates before the end of 2023.
Most of 2022, Alberta experienced a surge in both international and interprovincial migration contributing to tighter rental markets and ownership demand. Constant economic growth and relative affordability is to be seen to support elevated migration levels well into 2023. Most of the interprovincial migration has been driven by people locating from Ontario and BC to Alberta. The change in migration is on track to help offset the impact of larger lending rates and support a housing market that is stronger than pre-Covid levels.
The city of Calgary has seen the largest rise in employment in the province as it has gained not only from job growth related to the removal of COVID restrictions but also recorded strong gains in professional, scientific, and technical jobs. Growth in jobs is expected to slow down in the year of 2023 by one percent. However, previous highs in professional jobs and further gains in the sectors such as healthcare should remain to help a relatively stronger housing market.
Calgary hasn't fought supply difficulties for some time, but resale inventories ended in 2022 at the lowest levels seen since the pre-financial crisis in 2005. Although some of the supply difficulties are expected to be recognized by the new home sector, there is no indication that current construction levels relative to the population will create a plan where we will see much more supply come into the market. Especially with apartment-style products, where almost half of the total beginnings this year are intended for the rental market. Newer supply in the detached market leans towards being at a higher price point offering limited supply relief for lower priced detached homes. A large concern is that the supply levels remain low relative to demand which could prevent home prices from stabalizing this year.
Calgary Resale Market
Sales action was intended to be strong in the spring and slower in the last half of the year following rate gains, in the year of 2022. The unexpected was the reported high levels of sales accomplished earlier in the year, resulting in a record year in sales.
The rise in lending rates forced a surge in sales over the first quarter of 2022. Conditions in the city started to change by June after the third consecutive rate gain and steep price gains caused sales to slow down in the detached sector. City wide sales peaked record levels in 2022, thanks to the strong growth in row and apartment properties. At the same time, the decent growth in new listings in 2022 was not nearly enough to balance the gains in sales and supply levels have stayed low, especially for lower-priced products.
Prices began to rise by over 14 percent from the end of 2021 to the peak in May 2022, as sales growth far surpassed the additions to supply. From the high in May to the end of 2022 prices declined, but not enough to offset the earlier gains as annual standard prices rose by 12 per cent.
Sales in detached homes experienced a high rise early in 2022 with many pullbacks later into the year. Declines later into the year offset earlier gains and annual sales fell by about seven per cent. Although larger lending rates impacted sales action, the decline was driven by easing sales in the lower price ranges. The extreme decline in new listings for homes priced below $500,000 supplied limited selections for potential purchasers searching for affordable detached homes, limiting the sales in those ranges. While yearly sales did expand in higher price points by the end of the year, further rate gains did dampen actions in the upper price ranges too.
Supply gains later in the year of 2022 were limited to the upper price ranges ending in divergent conditions that were dependent on price, while conditions remained tight across all price ranges throughout the spring. Near the end of 2022, the outcome was persistent seller's market conditions for lower-priced detached homes and levelled conditions in the upper price ranges. Altogether recent price changes did not offset the earlier gains and annual prices stayed 14 per cent higher than 2021.
Moving into 2023, we forecast that supply levels will continue relatively low for affordable products as larger lending rates will deflect more move-up opportunities for some buyers and prevent sales growth in detached homes. At the same time, most of the new construction tends to be aimed at the higher price ranges restricting the options for consumers in the lower price ranges. However, supply levels are anticipated to rise more in the higher price ranges relative to demand which will produce some downward pressure on home prices outweighing any gains that may still be happening in the lower price ranges. Altogether, detached home prices are anticipated to ease a little by less than two per cent.
Earlier gains were offset by fallback later into the year, leaving yearly sales just below last year's reported level. A decent drop in new listings leaving limited options for prospective buyers looking for much more affordable products, while sales did ease in 2022. Months of supply did enhance in the later part of the year but continued low relative to historical levels. The persistently tight conditions did support yearly standard price gains of 12 per cent.
Moving into 2023, sales action is anticipated to ease relative to the higher levels accomplished over the past couple years but continue stronger than activity recorded before the pandemic as purchasers remain to seek out affordable selections in the market. At the same time, additional supply selections coming from the new home market will add choice to the market. Supply gains are anticipated to support more balanced conditions and ease some pressure off prices, which are expected to stabilize in 2023.
A change toward more affordable housing selections, row sale activity hit a new reported high in 2022. Near the beginning of the year, new listing growth supported stronger sales. However, like other property types, fallbacks in new listings happened in the later part of the year, forcing inventory levels to drop to some of the lowest points in nearly a decade. The tight market conditions helped an annual price rise of nearly 15 per cent.
Larger lending rates will remain to draw consumers to this market sector, but supply levels will most likely remain relatively low in 2023 compared to sales, putting a stop to any significant changes in prices. While we do not expect prices to ease in this sector, the pace of growth is expected to slow to around one per cent.
Changes in the apartment condominium sector managed to take longer then other property types as this sector has fought with excess supply for many years. In 2022, a new record high year for sales because sales activity was higher than the previous year in every month. Demand was mainly driven by those looking for affordable options in the housing market. At the same time, rising rental rates are also thought to have increased condominium ownership demand from investors. The large rush in sales in 2022 only happened due to the level of new listings available for this sector. While the growth in new listings supported the sales, growth in sales left behind the addition of new listings and inventories eased as did the months of supply. Tighter market circumstances helped price growth, as the yearly standard price rose by nearly nine per cent in 2022.
Rising prices, combined with higher lending rates, are expected to cool sales activity in 2023. However, the relative affordability of apartment condominiums and rising rental rates are anticipated to keep ownership sales for apartment condominiums above long-term trends. It's still take several months before the market changes into a more balanced territory, while some supply relief is most likely to come through the new home market. Altogether standard prices are anticipated to start to balance this year, helping a modest growth of one per cent, while there could still be some price changes.
All thanks to strength in gains early in the year of 2022, Airdrie sales hit a new reported high. The growth in sales was possible thanks to all the new listings early in the year. However, like other markets, conditions continued tight and forced significant price gains and larger lending rates, sales action started to ease over the last half of the year, enough to force some modest gains in inventory levels and change the market away from the intense seller's market. On a yearly basis the standard price continued to be 20 per cent higher than last year, while prices did start to trickle down from the record high in April.
Moving into 2023, larger lending rates are anticipated to remain to weigh on demand, helping push changes away from tight market conditions. However, supply levels are anticipated to continue relatively low on both the resale and new home side. This should place limits on price changes in 2023.
In the last half of the year, sales in the town of Cochrane eased over last year's reported levels, thanks to fallbacks. However, with 1,136 sales in 2022, levels were 66 per cent higher than long-term trends for the area.
New listings in the town did rise a little bit compared to the previous year, supporting some year-over-year gains in inventories over the later part of the year, unlike some areas. While the rise in inventory has most recently supported the market out of the strong seller's conditions recorded earlier in the year, supply levels are still low by historical standards, which will help prevent a larger change in prices.
Standard prices did fall down from the June 2022 high, but on an annual basis continued almost 17 per cent higher than last year. Detached and semi-detached yearly price gains reached around 20 per cent. Moving into 2023, we should see more even conditions play out as additional supply in the new home market will take some of the pressure off resale activity.
Limited supply compared to the demand in the market persisted throughout most of 2022, supporting a yearly price gain of 16 per cent. However, in 2022 there were some new listings helping further sales growth, which touched a reported-high levels on a yearly basis. Easing sales in the last part of the year did contribute to some year-over-year gains in inventory levels, but altogether supply continued low relative to historical levels.
Moving into 2023, conditions in the market continue relative tight. Changes in the more steady market will be dependent on supply changes. Much of the gains have been multi-family properties, but there has been an increase in new homes starting action, which should support the supply. The tighter conditions will most likely deflect a significant change in price in 2023.
Annual sales had gone down by 13 per cent, strong growth in sales in the first half of the year was not enough to offset the easing that happened at the end of 2022. However, sales eased from reported highs, and with 534 sales is still 54 per cent above long-term trends for the area. The fallback in sales was greeted with a gain in new listings, which started to help support gains in inventory levels and a change to more steady conditions by the end of 2022. Changes away from the extremely tight conditions recorded earlier in the year forced prices to ease from their May peak. However, the total residential yearly standard price in 2022 continued 16 per cent higher than the year before.
Prices are also higher as the yearly detached standard price reached just below $700,000 by the end of the year, while typical detached homes are larger in Chestermere when in comparison to Calgary. Larger lending rates, mixed with more supply selections, will most likely force some changes in prices over the next year, but the changes will be limited thanks to supply levels remaining low based on the historical benchmark.
Closing in on the record high set in 2006, relative affordability in High River kept sales rising in 2022. The gain in sales was possible thanks to the yearly improvement in the new listings in High River. However, new listing growth wasn't enough to push a manager change in inventory levels, which by the end of the year continued lower than the levels recorded in 2022. This also established that months of supply continued relatively tight at less than two months of supply. Tight conditions helped a yearly standard price gain of 14 per cent in 2022.
The typical detached home price in High River is much lower than the other surrounding areas, which could remain to draw people to the area in a community of larger lending rates. However, moving into 2023, the reported low supply levels could deflect more sales action in the area. Overall, larger lending rates are building more cautiousness in the market, which will likely deflect the upward price pressure in the market that usually happens with low supply levels.
Sales continue relatively untouched over the previous year, mainly because sales growth in the earlier part of the year was met with a fallback in the last few quarters. It was not enough to help inventory growth, even though there were some modest gains in new listings. In fact, on average inventory levels in 2022 were 50 per cent lower than the usual levels. Earlier in the year, tight conditions did help support price gains. On a yearly basis the standard price rose by 11 per cent, while prices eased from the monthly peak in June, similar to other surrounding areas.
Moving into 2023, larger lending rates will weigh on sales. Although, with supply levels continuing relatively low, prices in the area should continue steady compared to 2022.
Sales in Canmore eased over last year's reported high but continued well over the long-term trends in the area. The improved wedge between sales and new listings did force inventory levels to trend up by the end of 2022, while new listings did fallback, likely preventing stronger sales. This also forced a change from stronger seller market conditions to a market that is more steady.
A change to more steady conditions took some of the pressure off prices after touching a reported high in June. Despite some changes, the yearly standard price lifted by 17 per cent. The price growth was higher for detached homes where the yearly standard price touched $1,307,808, a 23 per cent increase over the year before.
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