Calgary’s housing market was rocked by the COVID-19 pandemic during the first half of 2020, and a resurgence in COVID-19 cases will certainly impact the performance of the market as we approach the end of the year. TD forecasts Alberta to be the second hardest-hit province in Canada, facing a 7.2% drop in real GDP with Alberta's unemployment rate soaring to an annual average of 11.5%. The unemployment rate is expected to recover to 2019 levels by 2023.
With house prices sluggish, could now be the time to pick up a bargain?
Alberta's energy sector has also been heavily impacted, as crude production fell more than 10%. The number of home sales fell 8.7% in 2020, the largest drop in Canada, and is expected to fall another 10.3% in 2021. Backing Alberta's sluggish housing market performance is a forecasted 7.4% drop in existing home prices going into 2021. At the same time, Alberta cut their corporate income tax rate to 8% in July.
A gloomy provincial outlook is also shared with Calgary’s expected housing market performance. Year-to-date, housing prices in Calgary declined 1%, a slight recovery after declines of over 7% in housing prices in May. Apartments were hit the hardest, after seeing prices fall 12% and sales volume plummeting over 60% in May. Apartment sales also fell for seven months in a row year-over-year.
Millennials are still struggling to get on the housing ladder
The Canada Mortgage and Housing Corporation found that Calgary's younger population, those 25 to 34 years old, has shrunk since 2016. As these are more likely to be first time home buyers, it will translate to lower housing demand. New home listings have dropped to levels not seen since 2001. Meanwhile, the number of completed and unsold homes reached a 19-year high.
Supports were given to homeowners, such as the deferral of Calgary’s property tax to September 30, 2020. Edmonton property tax payments were also extended to August 31, 2020 with late fee waivers.
Sales of detached homes are increasing
The Calgary Real Estate Board (CREB) found that sales of detached homes increased 23% year-over-year in October, which the CREB noted was due to not only low current mortgage rates in Alberta but also due to lower housing prices. This bump in sales was not seen equally across Calgary's entire housing market however, as the largest gains were in homes above $600,000.
Prices in the City Centre continue to lag behind the performance of other districts, such as Evergreen, Acadia, and Lake Bonavista in the South and Dover and Penbrooke Meadows in the East. West Calgary saw housing prices drop the most out of the city’s neighbourhoods, with a 4.5% year-over-year drop in November.
Alberta saw its largest loss due to inter-provincial migration in over 25 years in 2020, as more people left the province to head to British Columbia, Ontario, and Nova Scotia. Limits on international migration will also slow growth.
Investment in affordable housing
The City of Calgary announced investments into renovating affordable housing units in December. Low-income homeowners have been particularly hit hard by the pandemic. Calgary Housing Company, a provider of subsidized and affordable housing and is also the largest residential landlord in Calgary, saw the number of tenants paying their rent late increase by 40%, while rent arrears have doubled and 500 eviction notices were served in August.
It remains to be seen if the effects of the COVID-19 pandemic will significantly linger into 2021 as a second wave builds. Looking towards December 2020, average home selling prices are expected to drop almost 8% to $440,000. Inventory continues to drop after a peak in summer, while the number of homes sold remains steady. Slower population growth and declining labour income will limit future housing demand.