With the arrival of 2017, we have more question marks and uncertainty than ever before. I am getting bombarded with questions about how the market will perform in 2017 in comparison to the previous year; when we will finally see the bottom; and how the revitalization of the oil industry will affect the Calgary real estate market. Here is a detailed analysis of the market influencers for the Calgary real estate market and their outlook for 2017.
Today, we will be talking about Net Migration:
Job losses and higher unemployment levels in 2016 not only made it difficult to attract migrants to the city, but also caused more people to leave than come in. We had anticipated the net migrations to be slowed, however what we saw was was an outflow greater than the levels recorded in 2009.
The City of Calgary anticipates net migration will total 1,600 people in 2017, which is well below the decade long annual average of more than 14,000 people. These weak migration levels will continue to prolong significant improvements in housing demand this year.
- Calgary's net migration is expected to total 1,600 and 1,500 in 2017 and 2018.
- International migration has kept provincial levels positive, but inter-provincial migration has recorded quarterly declines since the fourth quarter of 2015.
- Interprovincial migrants were moving mostly to British Columbia and Ontario. Moving into 2017, weaker economic growth is expected in both of those provinces due to slower growth in their housing markets. These factors may limit some of the outflow of migrants from Alberta to those regions.
Comparison of Past Recessions and the Impact on Housing Prices
The current economic downturn has been far longer and deeper than original estimates. After two consecutive years of recessionary conditions, many have concluded this downturn is worse than that experienced in 2009 and more parable to the infamous '80s in Calgary, which was the last time Calgary experienced a prolonged recession with double-digit unemployment rates and steep home price adjustments.
These comparisons have merit, but there are some key differences that shouldn't be overlooked. The pullback in the '80s was also oil related, but we have not seen the same kind of impact on home prices, primarily due to supply levels in the market. Resale supply did not rise to levels recorded in the last cycle, nor were their reports of large amounts of foreclosures coming onto the market, like in the '80s. So while demand has fallen well below typical norms, supply levels have not risen to previous highs, preventing steeper price adjustments.