CALGARY – In two years, Calgary’s resale real estate market has gone from “sizzle to fizzle to simmer,” incoming Calgary Real Estate Board president Diane Scott said Wednesday.
Aff ordability and low interest rates will keep the pot slowly boiling this year, creating modest growth in sales and prices, she predicted as the board hosted its annual forecast conference.
A panel of economists mostly concurred with the board’s projection of a continuation of the gradual recovery experienced in the second half of 2009, faltering later this year as low interest rates rise to more normal levels.
Scott told about 1,000 real estate agents in attendance a recovery in Calgary’s market is highly dependent on prices for oil and gas.
“Calgary and Alberta remain tied to global energy markets and, ultimately, the outlook for oil and gas will play a big role in employment and migration to Calgary,” she said. “The good news is we have the energy to recover.
“The road will be a little bumpy, but there is light on the horizon.”
The board estimates Calgary-region single-family home sales will climb to 17,000 from 14,440 in 2009 and 7,000 condominium units will change hands, versus 6,328 last year.
In 2007, single-family sales added up to 18,438 and there were 8,236 condos sold. In 2008, the numbers were 13,455 and 5,661, respectively, with the single-family number the lowest since 1996.
The board predicts the average price for a single-family home in Calgary in 2010 will jump six per cent to $470,000 from $442,327 last year and the average condo price will rise 4.3 per cent to $296,000 from $283,734 in 2009.
The average single-family home price peaked at $505,920 in July 2007 and condo prices hit a record $332,237 in May 2007.
Surrounding towns are expected to experience 14 per cent higher sales and 3.2 per cent growth in average prices.
The downtown apartment condo market is expected to be particularly slow this year, while smaller, single-family homes and lower-priced segments will lead in sales and price growth.
Scott noted that younger people buying starter homes have fuelled the market’s recovery so far. Better afford-ability will help encourage 15,000 people to relocate to Calgary this year, the board predicts.
The low level of listings in the market at year-end is expected to grow throughout 2010, giving buyers more options.
“We will not likely tip to a seller’s market until the end of 2010 and into 2011,” said Scott, describing the current market as “balanced.”
Panellist Adam Legge, chief economist for Calgary Economic Development, said he doesn’t think the pace of the recovery in the city in the second half of 2009 is sustainable because the recovery in the larger economy is largely based on stimulus spending and inventory replacement.
He said news Tuesday that the ConocoPhillips and Total plan to expand production at the Surmont in situ oilsands discovery near Fort McMurray, while encouraging, won’t necessarily help create jobs and confidence in Calgary.
“We’re going to see probably a number of years of very, very tepid growth in Calgary,” he said. “There’s not going to be any zooming to the nearly eight per cent GDP growth we saw in 2006.”
Warren Jestin, chief economist for Scotiabank, said he’s not a “double-dipper” — a proponent of a quick return to recession — but he does predict better-than-expected growth in the national economy in early 2010 to slow down in the second half of the year as the Bank of Canada raises its trendsetting interest rate by as much as 200 basis points.
He said the economy, after bumping along the bottom in the first half of 2009, is in a “good news” phase now, but that’s only because there’s less frequent bad news (such as Wednesday’s stock market sell-off).
Two real estate agents questioned panellist Richard Cho, Calgary market analyst for Canada Mortgage and Housing Corp., about whether the federal government will increase the minimum allowable down payment for first-time homebuyers above the existing five per cent.
Cho said the government is looking at it as an option, to prevent homebuyers from taking on too much debt, but added that the change wouldn’t have a great impact on the housing market because not many people use it.