We’re bombarded by differing news from various sources (FindCalgary.com Real Estate News Archive)
Some predict “moderate” growth, others a “correcting” of real estate prices.
“The 2008 forecast for Calgary prices is significantly different depending on who is making the prediction. Re/Max’s forecast is for prices to remain the same next year. Canada Mortgage and Housing Corp. is forecasting a 7.7 per cent growth. And the Real Estate Investment Network is calling for a 12 per cent hike in average Calgary prices.” – December 18, 2007 – Calgary Herald.
Royal Lepage’s report that was just released predicts a 4% rise in Calgary home prices, with the national average rising 3.5% in 2008.
Who do you believe? Many of the predictions are from inherently biased sources with conflicts of interest. At the same time, their credibility is at stake if their forecasts are off base.
As we can see from the chart below, Calgary real estate prices began their quick escalation near the end of 2005, reaching their peak this summer. The median and average prices have been dropping (SFH, Calgary) since the summer highs, but how far will the prices drop? If we were to extrapolate the steady climbing price trend from 2002-2005…
Was this price escalation a bubble, or was Calgary simply catching up to other major Canadian cities? Does Calgary have the same economic and foreign investment factors such as Vancouver and Toronto to justify high property prices? Will prices stabilize until incomes catch up to recent price escalations, or will they drop allowing more buyers to enter the market? What do you think?
It should be noted that it’s very easy to over generalize the real estate market in Calgary. Many communities defy price trends (whether going up or down) You can view the community stats for Calgary on this page
Another factor is the inventory available and the absorption rate. Historically, sales drop off during the winter months as we can see in the graph below:
However, we still have over 4000 active SFH listings, compared to 2,623 at the end of December 2006
It’s interesting to note that there are 1,400 more listings than this time last year, and there are 1,500 vacant/new construction homes on the market. With 35% of the SFH’s listed vacant, what effect will this have on the market?
Fundamentally, Alberta’s economy is still healthy. Alberta employment growth leads the rest of Canada, with continued growth expected for exports (source)
“Alberta has had the highest standard of living of any province every year since the early 1980s, and there is no letup in sight. Moreover, its GDP growth has outpaced Canada’s overall growth almost every year since 1990, and this strong performance is expected to continue over the medium term.” – Global Insight, Canada (Aug 2007)
On the other hand, we have to keep an eye out for other factors: US subprime fallout. “TD Canada Trust is the only one of Canada’s big banks not to have any writedowns in 2007 for investments in some way linked to the default-hit U.S. subprime housing market.” (Source) What will this do to interest rates? Oil & Gas Sector: How much of an impact will softening natural gas prices and the Alberta Royalty Review have on the future growth and development of Alberta? Housing Affordability Erosion: Many buyers simply can’t qualify for an average $400k home, even with 2 incomes. Rent in Calgary is the highest in all of Canada (Source) How much will this affect migration into Alberta?
What will 2008 hold out for Calgary? It will be very interesting to note whose predictions come the closest.
I thought it would be interesting for us to post Calgary’s real estate price predictions for the year here.
Again, here’s what the industry is predicting:
Re/Max: no price growth
Royal Lepage: 4%
Canada Mortgage and Housing Corp: 7.7 %
Real Estate Investment Network: 12%
FindCalgary.com poll results, closed December 2007. (204 votes)
Question: What will happen to Calgary home prices?
14% Price will stabilize
21% Rise Slowly
6% Skyrocket
34% Drop slowly
23% Plummet
Be sure to post your prediction for:
Single Family Home Average: % (+ -)
Single Family Home Median:
Condo Average:
Condo Median:
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Will these YoY gains continue into the spring and summer months, when prices reached MLS record highs in Calgary 2007? Will they approach those highs again? What do you think? 
