Canada’s housing market has long been considered quite overheated. This trend is mostly driven by the extreme markets of Vancouver and Toronto housing markets; these are the markets that government regulations that limit loan to value ratios among others were targeted at cooling. Conversely, the Fort McMurray housing market is crashing along with activity in the oil patch. But where does that leave Calgary’s housing market?
The Regulations that Are Slowing the Market
In the fall of 2017, the stress tests that used to only be applied to high loan to value ratios were expanded to apply to all loans. Another change was in the stress test itself. New home buyers were subject to a stress test based on either the Bank of Canada’s 5 year benchmark or the contracted rate for the loan plus 200 basis points – whichever was greater. This steeper standard for stress tests was intended to weed out home buyers who couldn’t afford their mortgage if interest rates went up significantly. Talk to a Calgary mortgage broker to find a mortgage you can qualify for.
The General Outlook
The Calgary Real Estate Board is predicting the Calgary housing market will remain stable for 2018. The higher interest rates and new, tighter mortgage criteria are expected to offset the economic rebound in Calgary. The rules are going to put downward pressure on prices as Alberta’s recovery from the last recession causes them to rise.
Where Each Real Estate Market Stands
The market for attached homes and detached single family homes are expected to be ideally balanced, with prices rising slowly and remaining affordable. The chief economist for the CREB thinks that the higher stress test standards and limits on mortgage insurance will put more expensive and larger homes out of reach for many people, but Calgary enjoys a large selection of affordable single family homes.
The CREB expects the resale of existing homes to remain steady or decline slightly in 2018 though they are expected to remain above 2015 sales figures. The volume of single family home sales is projected to dip but be offset by demand for duplexes and townhomes. New home sales, too, are forecast to be slightly higher.
For pre-owned homes, the price setback is expected to be 0.13%, though this is a negligible change given the nearly 4% decline in 2016; in 2017, it was only 0.17%. The price of single family homes was projected to go up 0.10% in 2018. Note that the benchmark price for single family houses in Calgary was roughly $505,000 in 2017.
The only exception is the apartment sector. That apartment sector is expected to struggle with excess inventory because there is greater supply than demand. The benchmark price for apartments was $257,700 and expected to drop by 1% in 2018. The likely result will be a continued lull in new multi-family housing construction for a few years until apartment rents begin rising, and then multi-family construction will start to rise. The chief economist of the CREB says that the condo market has a severe glut but thinks the oversupply will be absorbed if net migration continues to go up.