A cautious look ahead at our 2015 real estate market

Media headlines in the past week have ranged from “Alberta shouldn’t worry about low oil prices: ATB Financial Chief Economist” to “Alberta recession? The mindset is already setting in”.

It’s difficult to sift through the various opinions, statistics and forecasts and feel confident making personal decisions that affect your lifestyle and finances, such as buying or selling a house or moving money around in your investment portfolio.

I attended the annual Calgary Real Estate Board (CREB) forecast this week and want to present some of the numbers and opinions I heard there. The overall impression was not to panic or have any knee-jerk reactions to low oil prices or news of layoffs.

The official numbers from the Conference Board of Canada and the City of Calgary are that we should expect to have employment growth (not decline!) of 0.9% in 2015 and net migration of 15,280. The net migration number is WAY down from more than 45,000 in 2013 and about 23,000 in 2014 but still means overall population growth in our city.

Home builders are expected to reduce the number of new houses being built, so this helps supply stay in check, which contributes to a balanced market. Supply has been very low for a couple of years now, so we can afford to have a few more listings on the market in Calgary.

CREB is forecasting an overall price increase for single-family homes in 2015 of 1.8% and price growth of 1% for condos. There could be seasonal fluctuations that are more significant than those numbers, but the CREB numbers point to a fairly flat year overall.

This is welcome news for buyers who were discouraged by the 10% price increases and tight market conditions last year but still doesn’t spell doom and gloom for sellers, who, if the CREB numbers are accurate, should be able to achieve around the same sale price no matter when they list this year.

The number of sales is forecast to drop, which is understandable after the huge numbers posted in 2014. Single-family sales are predicted to drop about 5% and condos about 2%. The reason the drop is smaller for condos is that it is a more affordable price range so demand should stay stronger.

Our keynote speaker this year was Kevin O’Leary of Dragon’s Den and Shark Tank fame. Regardless of what you may think of his on-camera personality, he has many years of experience watching financial markets, making ruthless decisions and putting profits first, so it was an interesting perspective to hear.

A few tidbits I took away from his talk were:

  • He predicts that the increases in mortgage interest rates that we should see this year (he predicts about 0.8% average rise) will not have any impact on the real estate market (i.e. any changes in the market will be due to other factors).
  • He indicated that many Canadians have been substituting some of their safer investments in things such as bonds with real estate purchases, because the returns on bonds have been so dismally low (he said it’s like losing money!). This can help keep real estate demand slightly propped up even when economic conditions take a turn for the worse.
  • He does not foresee there being any major (10%+) correction in the real estate market in Canada and thinks that there will be some good buying opportunities out there (in real estate and the stock markets) and that it is not worth waiting for a possible future correction to make a purchase.

The CREB economist as well as a Government of Alberta energy economist in attendance both predicted that oil prices would climb back into the mid $60s this summer or fall and that, as long as this happened, we would avoid a major downturn in our real estate market.

I feel that it is important to proceed with patience in 2015 regarding your real estate moves. You will want to evaluate carefully your personal situation (both financial and lifestyle) and the market in which you are looking to buy or sell. However, once you do that, you may find that it is the right time to make a move. I can help with planning and strategy for the months ahead so feel free to call for a chat or to set up a coffee meeting to discuss your ideas and questions.