TD: Calgary Not Immune To Volatility, But Set To Outperform

TD believes that the average Canadian home price is “over-valued by roughly 10%” but that Calgary will outperform the national market according to their new report out today.

Regarding Calgary, TD states:

Solid annual economic prospects, full-time employment opportunities, net in-migration, low mortgage rates and solid income gains supported housing in 2011 and we expect such drivers to hold steady in 2012. However, the second half of 2012 should be better than the first half, given the former is when we expect commodity prices to stabilize. In turn, we have the region squeaking out positive price and sales gain, at a time when the national tally is expecting to see declines.

However, Calgary won’t be immune to the effects of higher interest rates. TD expects a “modest price and sale decline in 2013” (See chart below)

New construction starts are also expected to rise in 2012-2013, once again bucking the national trend.

However, prices on new homes will be fairly flat, on a year-over-year basis, as builders are mindful of the need to compete with the resale category. More largescale, shovel-ready projects can also be considered going forward, now that inventory levels are starting to diminish and worries about over-supply have begun to wane.

TD’s report provides a national perspective, as well as an in-depth forecast of 12 major markets.

You can read the entire report here

TL;DR: While no urban centre will be immune to the macroeconomic and interest rate headwinds, Calgary and Edmonton are likely to do better than the rest. By contrast, a larger-than-average price and sales correction looks to be in store for both Toronto and Vancouver.

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