The detached sector saw the most significant market shifts in 2018, due to weakness in demand.
Higher lending rates and stricter qualifications, combined with weak job creation in the higher-paid sectors of our market, have weighed on the traditionally higher-priced detached market. Supply was slow to adjust, causing prices to fall by 1.45 per cent this year, landing below levels from the 2016 recession.
Oversupply will be a consistent theme in 2019 and prices are expected to fall during the first portion of the year. As prices ease, purchasers may enter the market and help to reduce the amount of oversupply.
However, persistently high unemployment levels, weak wage growth and employment gains limited to traditionally lower-paid sectors will likely prevent a recovery in sales activity.
Overall, the oversupply in the detached market is expected to persist for most of 2019, causing further price adjustments, with no expectation of stabilization until the end of 2019.
Things to consider in 2019:
- Easing prices might draw more demand to the resale market versus the new-home market, particularly as starts activity eases.
- Price movements will not be equal across all price ranges. There could be price improvements in the more affordable sectors of the market, while price declines might be more significant in some of the higher ranges.
- Annual price declines of 2.33 per cent are expected, resulting in a detached benchmark price of $485,216.
- Sales are expected to ease slightly compared to last year, but will remain well below historical norms.
A look back at 2018:
- Sales activity eased by 16 per cent in 2018 compared to 2017. The decline in sales was far steeper in the beginning of the year, as potential purchasers adjusted to new lending rules. As prices trended down because of persistent oversupply, the pace of sales decline eased by the end of 2018.
- Reduction in new listings by the end of the year helped limit growth in inventory. Detached inventory rose to levels not seen since 2010, yet sales were far weaker than levels recorded in 2010 and months of supply resembled highs recorded during the financial crisis in 2008.
- Prices eased by 1.5 per cent, mostly due to declines in the second half of the year. The declines erased any gains made in 2017 and caused prices to remain four per cent below 2014 highs.
- Detached sales activity eased across all price ranges except the under-$300,000 range. However, this segment represents less than three per cent of all detached sales activity and reflects just over one per cent of inventory.
- Inventory levels rose for most price ranges, but reached new highs for product priced from $500,000 – $999,999.
Across YYC: The Detached Market
Detached sales activity eased in every district this year, with declines ranging from 11 per cent to 18 per cent. Easing sales and gains in new listings caused inventories and months of supply to rise across all districts. This resulted in downward pressure on prices in most districts.
The City Centre and West districts recorded prices comparable to 2017, while all other districts recorded declines that ranged from a low of one per cent to a high of three per cent.
The difference with these two districts was the amount of oversupply.
Months of supply – a measure of market balance – rose in each district, indicating more supply than demand, but it was only in the City Centre and West that months of supply did not push above levels seen during the 2015 recession. Both areas saw annual prices remain comparable to 2017, and while the prices generally trended down from January through to December, it was not enough to erase the gains that occurred in 2017.
Variation exists throughout the districts compared to citywide numbers, but it is important to note that trends can vary significantly by specific community, product type and price range.