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Weak demand, oversupply to push Calgary home prices down in '19: CREB

Attached homes for sale in the Livingstone community with the Calgary skyline in the distance on Wednesday, Jan. 30, 2019. CREB is forecasting another tough year for home sales.

Gavin Young / Postmedia

A United Conservative Party government would call on the federal government to eliminate mortgage rules that make it harder for Albertans to buy homes, UCP Leader Jason Kenney said Wednesday.

Speaking to a crowd of hundreds of realtors at the Calgary Real Estate Board's annual forecast event, Kenney said the mortgage stress test introduced at the beginning of 2018 and intended to ensure home-buyers can still afford their mortgages even if interest rate rise is substantially "an unfair attack on Alberta home ownership." He said if he becomes prime minister, he will introduce a motion in the legislature calling for the federal government to remove the rules from the Alberta market and will encourage other provinces to join in.

"One of the reasons why homes are less affordable in Alberta today is because of unfair rules imposed by Ottawa to deal with overheated real estate markets in Toronto and Vancouver," Kenney told reporters. "We (Alberta) did not have a risk of overheating … (Canada Housing and Mortgage Corp.) has taken out a bazooka rather than a flyswatter to deal with this problem."

Kenney's remarks came after a pessimistic 2019 housing market forecast from CREB, which is expecting Calgary home prices to fall by averaging 2.3 percent over the course of the year. The sliding prices expected in 2019 are a continuation of a four-year trend of declining sales activity and rising inventory on the Calgary housing market.

"Some of the factors are really what is happening in the energy sector and how it affects confidence," said Ann-Marie Lurie, CREB's chief economist. "And, of course, the main factor is really that job market. We continue to struggle with high unemployment rates, we are not expecting to see a lot of job growth, and that is weighing on our housing market as well. "

Lurie declined to comment on Kenney's proposal regarding the mortgage stress test, but said stricter lending conditions, combined with higher interest rates, is another factor that weighed on housing demand in 2018.

"There's no question that the more stringent tests have affected the housing market," Lurie said.

According to the Canadian Real Estate Association, purchasers who previously qualified for the average detached benchmark home in Calgary would now need to save additional $ 76,000 to buy that same home as a result of the new mortgage rules.

Cliff Stevenson, a Calgary realtor who serves as CREA's regional director for Alberta, said the increasing unaffordability of homes due to new lending rules is not just a concern in this province. He said the CREA has been lobbying the federal government for a "regionalization" of the mortgage stress test across the country.

"We agree with the federal government over the need to cool the two major housing markets of Toronto and Vancouver … but we are very in tune with the struggles of many regions in Canada that were quite affected by the stress test and are already experiencing a downturn in their housing markets, "Stevenson said.

The mortgage stress test, which aims to reduce the amount of debt homeowners and financial institutions can take on, applies to all Canadian homebuyers – even those who make a down payment of 20 percent or more. Kenney said the rules made sense for Toronto and Vancouver, where real estate speculation was rampant, but should have been applied in a "geographically targeted way."

He added the UCP is also interested in working with provincial credit unions and ATB Financial branches to help Alberta buyers side-step the rules. Only federally regulated lenders are obliged to apply the stress test, although many other lenders have been voluntarily applying it.

Speaking to reporters in Calgary on Wednesday, Premier Rachel Notley said calling for the removal of the mortgage stress test for Albertans is something that the NDP government could "look into," but she cautioned that Albertans actually carry a high level of debt relative to other Canadians .

"We need to be careful that we do not find ourselves in a situation where people are taking over a debt they can not manage," she said.

While resale sales activity is expected to remain low for the duration of 2019, CREB there are signs that the Calgary housing market is starting to adjust to slower sales. That should help reduce some oversupply in the market and put the industry in a more stable position by 2020, CREB said.

The benchmark price for a detached home in Calgary declined 1.2 percent year-over-year in 2018. It hit the low of $ 481,800 in December 2018, down from $ 521,600 in October 2014.

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