What’s up for the Housing Market in Calgary for 2023?
What’s up for the Housing Market in Calgary for 2023?
In Calgary, the housing market is expected to remain strong in 2023 with sales near record levels, despite elevated lending rates. Migration and employment are expected to help offset the impact of higher lending rates, keeping annual sales activity higher than levels achieved before the pandemic. Low supply levels, especially for lower-priced product, are expected to support modest price growth. Total residential prices in Calgary are expected to stabilize in 2023.
ECONOMIC SUMMARY
The pandemic has caused global energy markets to face a range of geopolitical issues and rising inflation and interest rates. In 2022, the Bank of Canada has significantly increased its rate from 0.25% at the start of the year to 4.25% by the end of 2022. This is expected to cause a mild and short-lived recession in Canada. Commodity strength is expected to provide some cushioning to the economy, particularly in Alberta, where economic growth is likely to slow. Migrants to the province, as well as job growth in higher-paid industries, are expected to offset some of the effects of higher lending rates on the housing market.
BUYER & SELLER CONSIDERATIONS
In 2023, prices for residential properties are expected to remain relatively stable, although buyers and sellers may experience different price movements depending on the property type, price range, and location. There is potential upside to the forecast if interprovincial migrants are less sensitive to rate changes, but potential downside if environmental and energy sector policies do not emerge as expected. Market trends are expected to be divergent between property types and price ranges, with larger year-over-year changes expected in the first half of 2023. The largest risk to the forecast is home prices.
COAST TO COAST COMPARISON | HOW IS ALBERTA DIFFERENT?
During the pandemic, the housing markets in the larger cities in Canada experienced significant price gains from increased demand coupled with a decrease in supply. Alberta, however, did not experience the same level of gains as the market had already been in favour of the buyer due to an economic contraction from 2014 energy price drops. While some price declines are expected in these markets, Calgary and Edmonton are not anticipated to experience the same level of declines as they have not seen the same level of gains. Alberta is expected to be relatively more immune to the impacts of inflation and higher lending rates due to higher commodity prices, interprovincial migration shifts, and relative affordability.
LENDING RATES & INFLATION
In 2023, inflationary pressures are expected to ease, which should prevent any significant increases in interest rates. The Bank of Canada is unlikely to lower overnight target rates until 2024, but there could be reductions in mortgage lending rates before the end of 2023.
POPULATION
In the first three quarters of 2022, Alberta saw an increase in both international and interprovincial migration that has resulted in higher rental prices and an increase in housing demand. This shift is expected to help balance out the effects of increased lending rates, and is anticipated to sustain a housing market that is stronger than pre-COVID levels. The majority of interprovincial migration is from people moving from Ontario and British Columbia to Alberta.
EMPLOYMENT UPDATE
Calgary has seen the largest gain in employment in the province due to job growth related to the removal of COVID restrictions and also an increase in professional, scientific and technical jobs. Job growth is projected to slow in 2023, but gains in professional jobs and other sectors, such as healthcare, should continue to support a strong housing market.
NEW HOME IMPACT
Calgary has had historically low resale inventories in 2022, with levels not seen since the pre-financial crisis in 2005. Although the new home sector is expected to supplement the current low supply, the majority of new construction is intended for the rental market, not for buyers. Detached home supply also tends to be of a higher price point, meaning that there may not be much relief for buyers looking for lower priced homes. Due to the low levels of supply relative to demand, it is unlikely that home prices will stabilize in the near future.
CALGARY RESALE MARKET in 2022
In 2022, record high sales activity was achieved thanks to a surge in sales caused by three consecutive rate gains in the spring. However, the rate of sales slowed by the end of the year as supply levels were not able to keep up with the rapid gains in sales. Despite the slow down in sales, prices rose by 12% at the end of the year due to the rapid increase in sales earlier in the year.
DETACHED HOUSING MARKET
In 2022, detached home sales saw a steep rise early in the year, then significant pullbacks later in the year, resulting in an overall 7% annual sales decline. Higher lending rates did impact sales activity, but were mainly driven by a sharp decline in new listings for homes priced below $500,000, restricting sales in the lower price range. Annual sales did grow in the higher price points by the end of the year, but further rate gains dampened activity in the upper price ranges. As we move into 2023, supply is expected to remain low for affordable product and higher for higher price ranges, resulting in a sellers' market for lower price homes and balanced conditions in the upper price ranges. Prices are expected to ease by less than 2%.
SEMI-DETACHED MARKET
In 2022, initial gains in sales were offset by pullbacks later in the year, leaving sales just below the previous year's record level. This was partly due to a drop in new listings, resulting in limited affordable options for buyers. Despite the tight conditions, benchmark prices still increased by 12%. Moving into 2023, sales activity is expected to remain stronger than pre-pandemic levels, but will be moderated by new home market supply, leading to more balanced conditions and stable prices.
APARTMENT
In 2022, apartment condominiums saw record-breaking sales activity driven by demand for affordable housing. This surge was made possible by the availability of new listings and resulted in a tighter market as inventories eased and prices rose by nearly nine percent. While sales are expected to cool in 2023 due to rising lending rates, affordability and higher rental rates are expected to keep condominium ownership sales higher than long-term trends. New home supply is expected to provide some relief, resulting in benchmark prices stabilizing and modest annual growth of one percent.