Calgary’s Housing Boom: Factors & Risks

Report Housing BoomCanada’s housing boom effectively ended a few years ago after the recession and several rounds of mortgage rule tightening,  but three cities made a “Lazarus-like” recovery and are making rapid price gains according to a feature report by BMO released yesterday.

Senior Economist Sal Guatieri outlines several factors why Calgary, Vancouver, and Toronto are still hot markets while the rest of the country has cooled. Contributing factors include:

  • rapidly growing population
  • solid job growth
  • cheap financing
  • younger people driving demand

However, there are risks to the outlook.  The report concludes:

 “But worsening affordability suggests all three cities will simmer down when borrowing costs rise.  Pricey Vancouver and Toronto are likely to face moderate price declines, while still-affordable Calgary could get off more lightly. Vancouver and Toronto are vulnerable to a severe correction in the event of a recession or spike in interest rates—a risk that builds the longer that prices outrun income. Calgary isn’t immune to a downturn either, as a further slide in oil prices would stem its jobs bonanza. When oil prices plunged in the 2008 recession, Calgary’s house prices sank 18%, though they have since more than recovered their losses.”

To read the entire report, click here pdf  (begins on page 6)

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