If you have been keeping track of the Calgary real estate market, you probably know that the market has gotten off to a slow start this year. The recession is having a significant impact on every sector of the economy, including the real estate market, and it has been slow to rebound. There are signs of improvement already, but it is likely to be a slow recovery. This has left many experts questioning the future of the Calgary real estate market.
According to Anne-Marie Lurie, chief economist of the Calgary Real Estate Board (CREB), “It’s going to be a slow process of recovery. This recovery will feel really different. It’s going to take some time before prices are back to where they were, before we see more normal activity in the market, before we get rid of all this additional supply in the market.”
Oversupply and Low Demand
The most significant problem in the Calgary real estate market is the current oversupply of properties and low market demand. Economic uncertainty has many potential buyers putting off home purchases until a later date. Houses are on the market for longer periods of time, and there is pressure pushing the prices downward. Many of these properties are condos and apartments.
Unemployment in Calgary
One of the major issues with the low demand for houses is the fact that there is a high rate of unemployment in Calgary. The unemployment rate has been around 8 percent this past year. The job markets don’t seem to be improving quickly enough to prompt a rebound in the Calgary real estate market. This has left many potential buyers feeling uneasy about making such a significant financial decision.
Mortgage Stress Test
The government’s implementation of a mortgage stress test has also taken a toll on potential home buyers’ ability to purchase houses at an affordable price. This is partly causing some stagnation in the Calgary real estate market. Since January 2018, buyers have to qualify for a higher interest rate on their mortgages. The government implemented this stress test to ensure that home buyers could continue to make their mortgage payments even if interest rates were to suddenly rise. However, this move has prevented many from purchasing houses at affordable prices, even forcing some out of the housing market altogether.
Guy Huntingford, CEO of BILD Calgary Region, said, “The mortgage eligibility rules were a real problem. They [the OSFI] wanted to fix a problem in Vancouver and Toronto, but it didn’t need to be a national implementation, which has had a negative effect here, in a market that was hit harder than anywhere else and is looking to recover from the recession.”
Whether the Calgary real estate market will soon be able to recover from the recession so more people can buy houses remains yet to be seen. Hopefully, a lower unemployment rate this year will make home ownership more of a reality for Calgary residents.