Despite declining oil prices, city sees record in-migration, condo sales
You could almost say 2014 was a banner year for Calgary.
The city welcomed a record number of newcomers, with the addition of 38,508 residents elevating the total population to almost 1.2 million.
Sales activity in the condo sector came close to, and might have even broken, records.
And the long-awaited Bill 9 Condominium Act passed, providing more protection for condo owners.
“It was a good year,” said Mayor Naheed Nenshi. “Now, toward the very end of the year, we’re certainly starting to see some economic headwinds.”
However, the plummeting price of oil near the end of the year had many in the industry – particularly in Calgary, where one could say real estate is built on the back of the derrick – holding their breath.
Nenshi maintained Calgary is defined by more than energy prices.
“It would be a shame if we set the success of ourselves as a community on one number, the price of oil, over which we have no control,” he said.
“We continue to be the fifth best place in the world in which to live according to The Economist. We continue to be one of the most business-friendly places in the world. We continue to attract investment and attract people and remember. Last year, we added 40,000 people to this city. So clearly we’re doing something right. People want to be here.”
Industry observers agreed, suggesting it’s not the time to panic as the Calgary housing industry continues to be in a better position to deal with downturns in the energy industry than it was during the economic crisis beginning in 2008-09.
“Calgary’s been here before, and once again oil prices have people worried about a downturn,” said ATB senior economist Todd Hirsch. “But the city is more prepared than ever to withstand a possible slowdown in 2015.”
CREB® chief economist Ann-Marie Lurie said low energy prices did not have a profound effect on the housing industry in 2014 – and it likely will not over the short term.
In November, when oil dropped to under $70 per barrel, the city still posted positive year-over-year sales, with the strongest gains in the condo sectors.
Meanwhile, year-to-date sales up to the end of November increased by double digits – again fueled by gains in the condo apartment and condo townhome sectors.
Still, Lurie said strong sales only tell part of the residential resale housing story for 2014. Lower-than-expected listing levels – at least until later in the year – prompted overall market tightness and, in turn, double-digit price increases.
The average price of a home in Calgary as of the end of November was $475,640 – a 5.46 per cent increase year-to-date compared to the same period in 2013, which was among the highest percentage jump in Canada.
“Tight market conditions earlier in the year caused significant aggregate price gains,” she said. “However, it also resulted in a rise in new listings, supporting gains in inventory levels, and a push toward more balanced levels. This has helped ease the upward growth pressure on prices.”
Looking forward, Lurie remained positive employment growth will be steady enough to foster more balanced conditions in 2015. Yet she also noted a prolonged period could affect investment decisions, which could impact housing demand.
“Concerns over the potential impact will influence consumer confidence,” she said. “This is expected to cause supply and demand to ease in 2015, maintaining resale market balance and keeping prices relatively stable.”
Lurie also pointed out housing demand will be affected by Calgary’s tight rental market, which, with a 1.4 vacancy rate at the end of the year, is among the lowest in Canada.