Prices are on track to fall as much as 10% in Calgary, Edmonton and St. John’s Newfoundland over 2015 and into 2016 as the collapsing oil industry hits growth, incomes and employment.
“A significant softening in job markets will set the stage for a second major housing correction in Calgary and Edmonton since 2008,” TD economists Derek Burleton and Diana Petramala write in their report Thursday.
It’s a dramatic turnaround in a national housing story that saw Calgary leading price gains last year. Calgary homes prices climbed 9.8% year over year in 2014, the biggest increase among big cities.
Related The economist realtors love to hate: David Madani stands by 2011 prediction of Canadian housing ‘day of reckoning’ Low rates seen fuelling Toronto’s surging housing market as Alberta markets stall Calgary’s housing market under pressure as new listings, inventory soar But the 50% drop in oil prices since June is already taking its toll. By January, Calgary and Edmonton house sales had slumped 45% and 35%, respectively, from last year’s peaks.
Oversupply will further pull down prices. Listings have spiked in Calgary and Edmonton and record home building (up 50%) in those two cities last year will put more pressure on prices.
TD expects Alberta will narrowly avoid a recession, but the hit to incomes and rising unemployment will make it feel like one. The outlook for Newfoundland is much worse, with the province headed for recession this year.
TD Economics Unlike the west, Newfoundland’s housing market was already in trouble, with prices down 35% from the 2012 peak. The oil shock will extend what is now a three-year housing downturn.
While the oil capitals battle these headwinds, other parts of the country are expected to hold up well, despite repeated calls for a national housing crash over past years.
Housing markets in British Columbia are expected to be the best performers in 2015. A mild correction in 2011 and 2012 slowed home construction and the resale market has rebounded. TD says the market will be driven this year by solid economic growth, an influx of people from Alberta and the continued confidence of foreign investors.
Vancouver and Toronto housing markets are expected to see moderate increases, while Montreal and Ottawa are expected to be flat. LATEST NEWS VIDEOS
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