The City of Calgary has been weathering its own storm, long before the COVID-19 public health crisis roared into the spotlight. The city is heavily reliant upon the energy sector, and as a result, the local economy has been suffering from the fallout of sinking oil prices. Investment levels have been weak within the city, and Calgary’s construction sector has been dealing with a downturn of its own.
On the flip side, 2020 brought a promise of change for Calgary. The city’s GDP was expected to expand by 2.4% over the next three years as the energy sector started to show signs of stabilization. There was hope that this economic boost would help to lift demand within the city’s housing market, which has struggled with a surplus of real estate inventory. According to Calgary Real Estate Board (CREB) statistics, there was a year-over-year increase in sales of 4.35% in the first quarter of 2020, setting the Calgary housing market up for the best first quarter in years!
Unsurprisingly, the spread and implications of the COVID-19 crisis has derailed some of this optimism. The Calgary housing market has had to forfeit the gains it had made earlier in the year as many realtors, buyers, and sellers have had no choice but to press pause and stay home. Below, we dive into how the pandemic has impacted the Calgary real estate market, and what we can expect to see in the months to come.
The Impact of COVID-19 on the Calgary Real Estate Market
In early March of 2020, Calgary businesses and residents adjusted to a new normal amid social distancing measures to contain the spread of the COVID-19. While the real estate industry, deemed an essential service, was continuing to operate, REALTORS® were forced to pivot, forgoing open houses for virtual home tours and 3D 360-degree imagery.
The full impact of these measures and business closures were most felt by the Calgary economy and real estate market over the month of April. Overall home sales plummeted almost 63%, new listings were down 54%, and the average price of a Calgary home fell more than 8%. These trends were mirrored in the communities surrounding Calgary; over April only 60 sales were reported in Airdrie, and 17 homes were sold in Okotoks.
Amid an environment of business closures, social isolation and depressed consumer confidence, it comes as so surprise that demand within the market is falling, and that sales activity is on the decline. Chief economist for the Calgary Real Estate Board (CREB) Ann-Marie Lurie commented in the CREB market update for April: “Demand is also falling faster than supply. This is keeping the market in buyers’ territory and weighing on prices.”
In April of 2019, the average price of a home was $460,953 – by the end of April 2020, the average home price was sitting at $422,655. The steepest price plunge has been seen in homes priced over $600,000.
Reignited demand in the Calgary market will help to re-balance the market and flatten the curve in terms of dropping real estate prices. The question remains as to when those waiting out the pandemic will feel safe enough, and financially ready to return to the market.
Calgary’s Return to Business-as-Usual
Alberta Premier Jason Kenney has already announced a multi-stage rollout for the province to emerge from its COVID-19 lockdown, with some businesses given the green-light to open as early as May 14th. The success of this plan, Kenny comments, will depend on the capacity of Albertans to continue to heed rules put forth by public health officials, including limiting public gatherings of over 15 people.
With the local economy and daily life within Calgary already on the path to recovery this month, there is much hope that by summer, there will be enough of a climb in demand within the housing market to start reversing some of the dips caused by the public health crisis.
Hope for the Calgary Real Estate Market
Mid-way through April, Prime Minister Justin Trudeau announced that the federal government would be pledging $1.7 billion to clean up orphan wells across the provinces of British Columbia, Alberta, and Saskatchewan. As well as providing environmental relief, this move will bring a much-needed boost to the struggling prairie provinces.
Effective immediately, this incentive will help to provide thousands of jobs within the receiving provinces, also helping large corporations (some of the region’s main employers) avoid bankruptcy in the midst of the public health crisis and the plummeting oil prices. With this investment helping to maintain 5,200 jobs in Alberta, there is optimism that this will also provide a modest boost for real estate within the province’s major markets, including Calgary.
Prior to the outbreak, despite its high unemployment rate, the city of Calgary continued to grow in population, attracting residents from other areas of Alberta. As the city maintains its reputation as one of Canada’s top 10 affordable real estate markets, it will continue to pull homebuyers in, who will be even more keen to take advantage of low prices and low interest rates post-crisis.
Other financial incentives and programs introduced since the onset of COVID-19 will also help to soften the economic blow to homeowners in Calgary. Mortgage deferral programs will also prevent spikes in new listings which can further imbalance the market during periods of high unemployment. With listings declining proportionately with sales over the second quarter, says Lurie, this will make the market less competitive for those selling their homes in Calgary. “Given the nature of this crisis, the situation is evolving rapidly. If additional government policies and programs are enacted, it could help soften the economic burden faced by Albertans”, Lurie says.
While so much uncertainty remains regarding the economic, political, and real estate climate within Calgary, hope and a spirit of resilience remains strong.