Calgary’s real estate market poised to turn the corner in 2012: CREB
BY MARIO TONEGUZZI, CALGARY HERALD
CALGARY — Calgary’s residential real estate market is poised to turn the corner as 2012 will signal increasing demand for housing in the city, says the president of the Calgary Real Estate Board.
“I believe it’s imminent that we’ll start to see the result of all those economic indicators come to fruition and hit the ground, get traction this coming year. It’s got to happen,” said Sano Stante in a year-end 2011 interview.
All those positive economic indicators include strong economic growth, increased net migration and continued employment growth for both the city and the province.
But two reports in mid-December suggested some dark clouds could be on the horizon for the overall Canadian real estate market this year.
Scotia Economics, in its Global Real Estate Trends report, said Canada’s ongoing housing boom is in its 13th year but showing some signs of cooling. It said increased economic uncertainty combined with some recent slowing in the pace of hiring could dampen demand in the new year.
And a report by Bank of America Merrill Lynch said Canadian home prices are now showing many of the signs of a “classic bubble” with prices nationwide overvalued by about 10 per cent.
Also a report by TD Economics forecast residential sales in Calgary to increase by 0.1 per cent in 2012 to 22,600 units but drop by 3.3 per cent in 2013 to 21,900. The report is predicting the average price to grow by 0.5 per cent in 2012 to $404,100 but dip by 1.6 per cent in 2013 to $397,800.
“Calgary will not be immune from the impacts of higher interest rates and in turn, we have incorporated modest price and sales declines in 2013. Relative to the national story, however, the region is expected to out-perform most others over our forecast period,” said TD Economics.
Don Campbell, president of the Real Estate Investment Network, said the past year’s market has been a year of recovery as the market adjusted to the job and population slowdown of 2010.
“Any job and population changes aren’t reflected in the real estate market until 18 months after they occur. Confusing signals from the market numbers were expected and that is what we experienced,” he said.
“2012, especially in the second half of the year, we will see upward pressure on demand for resale real estate, which will be a good time for owners to start moving properties.
Average price increases will start to be more consistent in the back half of the year as the population and job growth continues to keep the pressure and increase demand. The big upward pressure on prices will really begin in early 2013.”
Stante said 2011 was more typical than some past years in the local real estate market.
“It’s more typical of what you might expect in this cycle of a normal recovery,” he said.
“In that cycle of a typical recovery you start to have some decreasing supply and we’re starting to see that now. We’re starting to see decreasing supply and the next phase is for demand to pick up.
“All the economic indicators are pointing to that. We’ve been saying all year that we are due for more in-migration which is a leading indicator for real estate, for the housing market. We’ve just started to see it happen. So it’s not a matter of whether it will happen. We see oil companies are filling up space. That tells you that they’re hiring. It tells you that jobs are coming. But what we don’t know is when they’re going to hit the ground in the real estate market. It’s more a matter of when than if.”
In 2011, there were 13,186 single-family MLS sales in Calgary, up 9.06 per cent from the previous year while the average sale price increased by 1.14 per cent to $466,402. There were 5,382 condo sales, up 3.98 per cent, but the average price dipped by 0.94 per cent to $287,172.
Dan Sumner, economist with ATB Financial in Calgary, described the local housing market in 2011 as “slightly disappointing.”
“We definitely saw a rise in sales from 2010 but sales still remain quite slow compared to 10-year averages ... Prices have been flat for now 2 years and it really continued along in 2011,” he said.
Sumner said he’s cautiously optimistic for 2012.
“Overall the Canadian housing market in general I wouldn’t say it’s in a place where I’d want to put a lot of money right now if I had to bet on it,” he said. “But as far as housing markets in Canada go, I think the ones in Alberta are probably the best — Edmonton and Calgary. That’s just because the economy here is really growing quite strongly and because prices have been a little bit slower to rise over the last couple of years.
“The Alberta economy is performing beautifully. It continues to perform beautifully. As long as oil prices remain up where they are, it’s never a certainty, but given the fact they’ve been very resilient thus far ... then the Alberta economy is going to continue to hum along.”
He also said there is no indication there will be much upward movement in interest rates in 2012 which will help fuel sales in the real estate sector.
Canada Mortgage and Housing Corp., in its Housing Market Outlook report in the fall, forecast MLS sales in the Calgary census metropolitan area to increase by 2.3 per cent in 2012 and the average sale price to jump by 2.2 per cent to $411,000.
“Many factors that support resale housing demand have become or remained favourable this year, including growth in full-time employment, low mortgage rates, and improved net migration,” said the agency. “However, competing factors such as uncertainty in the global economy has kept some prospective buyers on the fence and will continue to temper any large increases in sales.”
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