Image: The Calgary Real Estate Board is forecasting 25,598 home sales this year, down from 27,686 last year.
Calgary's real estate market, once blazing hot, is expected to cool down from its record-breaking levels in the previous year. However, this doesn't mean that home prices will follow a similar trend. According to a recent industry outlook by the Calgary Real Estate Board (CREB), prices are forecasted to continue rising, remaining at historically strong levels.
The forecast predicts a moderate growth rate for housing demand due to rising lending rates and home prices. Despite this, the citywide prices are expected to increase by over four percent in 2022. This increase would translate to a $21,179 bump in CREB's benchmark price for a detached home, reaching $549,662 this year, up from $528,483 last year.
The report states that the demand environment for resale housing remains strong, reflecting the ongoing economic recovery and improved job prospects. Many individuals were able to save more money during the COVID-19 pandemic, providing them with increased purchasing power. Consequently, CREB believes that sales will remain relatively high, with an estimated 25,598 sales expected this year, compared to 27,686 in the previous year and 16,149 in 2020.
While demand remains robust, the report highlights the potential challenge related to supply. Although housing starts activity improved in the previous year, resale supply may struggle to meet adequate levels to support balanced conditions in the earlier part of this year. As the supply-demand balance gradually improves, there may be a reduction in upward price pressure in the housing market.
However, Ann-Marie Lurie, the chief economist at CREB, advises cautiousness regarding the uncertainties that could impact the housing market. She states, "If supply levels remain low relative to demand, we could see stronger-than-expected price growth." On the other hand, if interest rates rise faster and higher than anticipated, it could lead to a significant pullback in sales.
CREB's market outlook aligns with recent reports on the Canadian housing market. PricewaterhouseCoopers mentioned in their real estate trends report that the housing sales activity in Calgary is reflective of an improving economic outlook. The Conference Board of Canada also forecasts a rise in housing starts in Calgary, reaching 11,950 in 2025, up from 9,448 in 2021.
With the Bank of Canada's decision on interest rates looming, potential homebuyers eagerly await their decision. The expectation is that central banks will need to raise interest rates to curb inflation, which has reached its highest levels in decades. Charles St-Arnaud, chief economist at Alberta Central, suggests that the Bank of Canada may wait until March to implement rate hikes.
He predicts that once the central bank starts increasing rates, they will do so by 25 basis points for three consecutive meetings, with the possibility of one additional increase before the end of the year. This could result in a total interest rate increase of approximately one percentage point in 2022.
Despite the anticipation of rising interest rates, mortgage rates have already started to show a slight increase in recent months.
While Calgary's housing market is expected to ease from its previous feverish pace, the outlook for home prices remains positive. With a strong demand environment and favorable economic conditions, Calgary continues to offer attractive opportunities for both buyers and sellers.
Disclaimer: The image used in this article is from the Calgary Real Estate Board and shows the forecasted home sales for this year.
