It was so nice to be back at the Calgary Real Estate Board (CREB) Economic Forecast yesterday to hear from some local experts about where we are headed as a city and what we can expect to see for the years to come. It’s another great reminder of why we are proud to be Calgarian!
2022 was a record year in many ways and we don’t expect 2023 to match that. However, with the growth in employment and migration, we should see stronger sales and prices than pre-pandemic levels (2015-2019). If you haven’t had the chance to read our last blog A Comparison of Three “Booms” check it out to see how 2022 stacked up against 2007 and 2014.
We will get into the predictions for 2023 but first, here are a few stats to show the CREB 2022 predictions vs. actual results:
- Detached prices prediction: +5.2% vs. actual: +14.5%
- Semi-Detached prices prediction: +4.7% vs. actual: +12%
- Townhome prices prediction: +3.2% vs. actual: +14.8%
- Apartment prices prediction: +2.5% vs. actual: +8.7%
- Employment prediction: +5% vs. actual: +8%
These stats show that predictions are difficult. This is why we do our best to stay on top of what is happening in our market and local economy throughout the year, so we can give our clients the most relevant data.
We are not quite out of the era of multiple-offer situations as we are seeing strong demand in today’s condo market and the lower end of the detached/semi-detached market. Inventory is low in all residential sectors (detached, semi-detached, townhome and apartment) which is why we are projected to see a decrease in sales in 2023. A decrease in sales doesn’t always mean a decrease in prices.
Until we see a significant jump in inventory, prices are expected to remain where they are due to the pent-up demand. This demand comes from an 8% growth in employment including many well-paying jobs created in the tech and energy world.
You may be reading media titles like “Canada’s home prices to fall 6% this year”. Well, the reality is that this may be true for Canada as a whole but Calgary continues to have a different outcome. For example, from December 2021 to December 2022 the average home price in Canada fell by 12%. Over that same time timeline, Calgary home prices went up 8%.
In an even more staggering stat, the difference in house prices from 2015 to 2022 was +73% in Vancouver, +123% in Toronto but a mere +18% in Calgary. We still have room to grow whereas those other markets have room for a bigger correction.
Calgary Real Estate Board’s Chief Economist, Ann-Marie Lurie, and other experts remain very optimistic that Calgary, although not immune to the “R” word, is in a pretty good position to see minimal effects of an economic downturn.
Typically, after a boom year, we would see a hike in interest rates and an increase in supply causing prices to drop. In the downturn after 2014, we saw inventory levels rise to about 7 months overall and closer to 10 months at points for apartments. As of today, we are at just 2.4 months of inventory overall in Calgary. Anything under 3 months is still considered a ‘seller’s market’.
At this point, there are many factors indicating we will not see a surplus of inventory which means prices should remain relatively stable. These factors include rental rate, migration, interest rates and employment.
Rental rates have increased upwards of 20% and are projected to remain high over the next few years, which has pushed a lot of renters into buying. Investors are also looking to take advantage of the cash-flow opportunities and are buying up units.
Calgary saw a surge in international migration throughout 2022 and a record-setting Q3 for people moving to North America’s third most liveable city. Typically, these new Calgarians will rent for the first year or so and then they’ll be ready to buy in the coming years.
The increase in interest rates has had an impact on a lot of people but specifically the “move-up” buyers. For anyone who bought before the significant price gains seen over the last two years, it may be a good time for them to sell. However, not only will they have to buy at higher prices, they’ll also be getting a much higher interest rate. If a move isn’t necessary, many homeowners will be staying put. This is another reason why inventory is and will stay low.
We have started the year off relatively slow compared to the last couple of years as there is a lot of uncertainty in the market right now. With another rate increase announced today from the Bank of Canada, buyers may be forced to put their purchase on hold. But so far, the increased rates has not fully dried up demand in Calgary.
2023 CREB price projections:
- Detached: -1.8%
- Semi-detached: -1%
- Row/Townhome: +0.8%
- Apartment: +1.15%
- Total residential: -0.6%
Keep in mind, these predictions are overall changes for the year. This could mean an increase in prices in the spring months and a pullback toward the end of the year.
Real estate can be confusing at times depending on who you talk to and what you read. The Calgary market is currently very different from other major cities in the country. On a more micro-level, certain neighbourhoods and home types will have their specific market conditions. This is why it is important to talk to your favourite local experts about your specific scenario. Please reach out if you have any questions about what this means for you! We’re always happy to help 🙂
-Parker & Amie
PS We have a lot of detailed graphs from the full market forecast for any of you analytical types! This includes a comparison of the length of recessions and recoveries against interest rates and inflation going back to the 1970’s. Just reach out if you’d like the PDF emailed your way.