It was less than a month ago that RBC was projecting that Alberta housing prices were going to rise over the next two years. Not anymore.
“Already there are signs of impending housing market downturns in Calgary and Edmonton, although these so far primarily reflect a loss of confidence caused by the sharp drop in oil prices rather than weaker population growth,” notes RBC’s provincial outlook update released on Friday.
Prices are now expected to fall -0.5% in Alberta this year with the caution that “more significant price declines may occur in 2016.” Home resales are to decrease by nearly -16% now, over double their previous forecast.
The report concludes: “Nonetheless, not all is bleak in Alberta. A population growth rate of 1.5% would still be stronger than the Canadian average. After a likely flurry of layoffs in the first half of the year, we would expect that businesses will start hiring again later this year. Such factors would support further growth in consumer spending in the province, albeit at a much more subdued pace than seen in the past few years. Assuming that governments refrain from slashing expenditures, we believe that there will be sufficient offsets to the negative developments to keep Alberta’s economy afloat this year and next. Downside risks will remain significant, however, at a time when any substantial loss of confidence could trigger a more damaging set of dynamics.”
Download the full report here.