Calgary Thriving On Growth 214 Economic Outlook & Regional Housing Forecast Mid year update
214 CREB. All rights reserved. The forecasts included in this document are based on information available as of July 214. Prepared by Ann-Marie Lurie, CREB chief economist. 3 Manning Road NE Calgary, Alberta T2E 8K4, Canada Phone: 43-263-53 Fax: 43-218-3688 Email: info@creb.com creb.com crebforecast.com crebnow.com
Mid year update contents Global Economy... 4 Summary... 4 Eurozone... 4 US Economy...5 China and Emerging Markets...5 Canada....6 Alberta and Energy....7 calgary economy... 9 GDP....9 Employment...1 Net Migration... 11 Calgary housing market...12 Rental... 12 New Home.... 12 Resale.... 14 Single Family... 16 Condominium.... 18 Forecast Risk...21 Forecast Summary... 22 References... 23 CREB 214 Economic Outlook & Regional Market Forecast - mid year update 3
global economy summary First-quarter growth fell short of expectations, causing many economists to lower their global forecasts. This was partly due to weaker growth in the U.S., China, Eurozone and other emerging markets. Despite the slow start, stimulus measures announced in the Eurozone and positive momentum in the U.S. Employment sector are expected to give rise to stronger economic activity as we move through 214 into 215. REAL GDP GROWTH 15 13 11 9 7 5 3 1-1 -3-5 27 28 29 21 211 212 213E 214F European Union China Canada United States World Source: International Monetary Fund, World Economic Outlook Update, April 214 eurozone First-quarter growth results were below expectations for the Eurozone. Combined with a high Euro and low inflation, European central bank took action in June that included lowering the Eurozone s interest rates and taking measures to support credit growth. While countries such as Germany and the U.K. outperformed expectations, several peripheral countries such as Italy and France struggled. It is expected that the steps taken by the central bank will support some growth in periphery economies export sectors. Despite the disappointing start, forecasts still point toward modest growth in 214. However, substantial growth throughout the region is not expected for several years. GDP GROWTH EUROPE % 3 2 1-1 -2-3 -4 France Germany Ireland Italy Portugal Spain United Kingdom European Union 212 213(E) 214(F) Source: International Monetary Fund, World Economic Outlook Update, April 214 4 CREB 214 Economic Outlook & Regional Market Forecast - mid year update
us economy Much of the global growth expectations this year were predicated on a rebound in the U.S. economy. However, first-quarter results showed the opposite. Experts indicate much of this was due to poor weather, slowing housing market and lower business output as companies cleared out excess inventory from 213. The housing market was not only affected by poor weather. It also faced the combined impacts of higher lending rates, lending constraints and double-digit price growth. Despite those early challenges, there was also significant positive momentum regarding employment. Nationally, all positions that were lost during the recession have since been recovered. Moving forward, forecasters expect that, despite the first-quarter setback, momentum is building and economic conditions will gain speed throughout the year. This optimism is based on factors such as accelerating job growth, reversal of regulatory constraints impacting housing, improved household balance sheets, rising business confidence and diminishing fiscal drag. (TD Bank) US EMPLOYMENT 3% 2% 1% -1% -2% -3% -4% -5% -6% 7 8 9 1 11 12 13 14 14,, 138,, 136,, 134,, 132,, 13,, 128,, 126,, 124,, Employment Growth Y/Y Employed US Bureau of Labor Statistics, Conference Board of Canada china and emerging markets The pace of growth is slowing in China, where there is continued need for both financial and economic reforms. The country is currently attempting to increase consumption instead of investment demand, which is expected to benefit over the long term yet it can create short-term uncertainty. The concern has mostly to do with the property market and how current changes will impact the financial system and, ultimately, commodity prices. Emerging markets growth is also expected to decelerate this year. While geopolitical issues in areas such as Russia, Thailand and Venezuela are impacting their respective economies, other emerging markets are facing restraining growth with tightening fiscal conditions. However, as economic growth picks up speed in advanced economies, this should generate a positive spillover effect in emerging markets by the end of this year and into the next. (Bank of Canada) CREB 214 Economic Outlook & Regional Market Forecast - mid year update 5
global economy canada Canada s economy grew at a slower-than-expected pace in the first quarter, mirroring the weak U.S. economy. As the U.S. economy gains speed and a weaker dollar improves our competitive advantage, Canada is expected to record export gains, resulting in stronger economic growth. Growth in non-energy exports is tied to the U.S. economic expansion, and will be reflected in industries such as logging and building materials. Unlike energy exports, experts indicate growth in non-energy sectors will be at a slower pace than foreign demand as our industry continues to face some competitive challenges. Faster growth in the energy export market reflects increased use of Canadian heavy oil in U.S. refineries. Further growth in rail transport capacity and higher energy prices should contribute to rising revenues and profits in the resource sector. (Bank of Canada) CANADIAN EXCHANGE RATE 1.2 1.8.6.4.2 Q1 1 Q1 2 Q1 3 Q1 4 Q1 5 Q1 6 Q1 7 Q1 8 Q1 9 Q1 1 Q1 11 Q1 12 Q1 13 Q1 14 Canada-US Exchange Rate, Quarterly Source: Conference Board of Canada While business investment is also expected to improve, it is not expected to generate significant job growth this year. Slack in the labour market and moderating consumer spending will likely not place much upward pressure on inflation. As a result, interest rates are expected to remain low well into 215. REAL ANNUAL GDP GROWTH Canada 2.2% Price Edward Island 1.4% Newfoundland and Labrador.8% Nova Scotia 1.6% New Brunswick 1.4% Quebec 1.8% Ontario Manitoba Saskatchewan 2. 1.9% 2.1% Alberta 3.5% British Columbia 2.3% 214(F) Source: Provincial Economic Forecast, TD Economics July 8, 214 6 CREB 214 Economic Outlook & Regional Market Forecast - mid year update
alberta and energy Alberta s economy continues to be fuelled by oil sands investments and oil production. Heavy-oil upgrading facilities in the U.S. have increased that country s capacity to take on increasing amounts of Alberta heavier crudes. This defies speculation that increased production in the U.S. energy sector would reduce demand for Canadian oil. In fact, because U.S. energy production focuses on light oil and unless refineries find a cost advantage to switch those that still require heavy oil will continue to turn to Canada. While there still exists significant uncertainty regarding pipeline approvals and we face elevated risk by being highly reliant on the U.S. market, oil-by-rail and other alternative transport methods has provided producers with an alternative to get their products to market, and is supporting growth. The AER estimates oil sands capital expenditures will decrease to $23.7 billion in 214 from $24.2 billion in 213. The prediction is based on decisions by some oil sands companies to cut their capital budget spending and delay the development of upcoming projects as a result of increased pressure from lower-cost conventional oil development in Canada and the U.S. At the same time, conventional oil and gas investment expenditures have also recovered. Based on total investment figures, oil and gas investment levels are still far above the levels of capital spending that occurred during the 26-8 peak. ALBERTA CONVENTIONAL OIL AND GAS AND OIL SANDS CAPITAL EXPENDITURE Billions Cdn$ 8 Actual Forecast 6 4 OIL SANDS 2 CONVENTIONAL OIL AND GAS 23 25 27 29 211 213 215 217 219 221 223 Source: Canadian Association of Petroleum Producers, AER CREB 214 Economic Outlook & Regional Market Forecast - mid year update 7
Note: oil prices New crude oil rail and pipeline transportation projects came online in 213 in central U.S. (Cushing), helping reducing transportation bottlenecks, lowering inventories by nearly half and supporting some recent price growth in WTI prices. According to EIA, this should help support average WTI prices of $98.67 per barrel in 214, up from its previous estimate that showed a slight decline in 214 prices. Oil prices are extremely volatile and often influenced by geopolitical risk. Recent political uncertainty is placing upward pressure on prices. If tensions ease and shale oil production rises at greater-than-expected levels, then prices will trend downward. Note: natural gas Several LNG export projects have been proposed on the coast of British Columbia that would help producers reach emerging markets in Asia. With an oversupply in North America, the ability to reach a growing market would provide significant upside to Canada s natural gas sector. As of early 214, the National Energy Board has issued export licences for the Kitimat LNG Operating General Partnership, B.C. LNG Export Co-operative LLC and LNG Canada Development Inc.. It had also approved five other projects to export LNG from the B.C. coast to Asia-Pacific markets. While this would support a renewal in Alberta s natural gas sector, there are still several pending regulatory approvals and investment decisions indicating project development at earliest would commence by late 215. alberta and energy continued While oil sands investment is expected to ease this year, rising production should fuel exports and support 3.5 per cent growth in the province s economy compared to 3.8 per cent in 213. This would make Alberta the highest growth province in the country. (TD Economics) Other sectors will also continue to benefit from the energy sector, notably manufacturing as it attempts to meet demand for machinery. The province has also benefited from strong net migration, employment and wage growth. The spinoff effects have fuelled growth in the consumer sector and housing markets. ALBERTA POPULATION GROWTH 4. 3.5% 3. 2.5% 2. 1.5% 1..5%. 2o 21 22 Population Growth CRUDE OIL PRICE US $ / BBL 16 14 12 1 8 6 4 2-5 Jun 5 Nov 5 Apr 6 23 24 25 26 Sep 6 Total Population Feb 7 Jul 7 Dec 7 May 8 27 28 29 21 211 212 Oct 8 Mar 9 Aug 9 1 213 214F 215F 216F 217F 5,, 4,5, 4,, 3,5, 3, 2,5, 2,, 1,5, 1,, 5, Source: Statistics Canada, Conference Board of Canada adjustment, Conference Board of Canada Forecast Jun 1 Nov 1 Brent Crude Oil Price WTI Crude Oil Price Western Canadian Select Apr 11 Sep 11 Feb 12 Jul 12 Dec 12 May 13 Oct 13 Mar 14 Source: Alberta Oil Sands BVM, PEMEX, Statistics Canada 8 CREB 214 Economic Outlook & Regional Market Forecast - mid year update
calgary economy gdp Calgary s economy continues to benefit from growth in the energy sector and spinoff effects. Based on Conference Board of Canada figures, Calgary s economy grew by 3.7 per cent in 213 and is forecasted to expand by 3.4 per cent in 214. CALGARY CMA GDP GROWTH 8% 6% 4% 2% -2% -4% Milliions ($22) 14, 12, 1, 8, 6, 4, 2, -6% 21 22 23 24 25 26 27 28 29 21 211 212 213 214F 215F Annual Growth Total GDP Source: Statistics Canada, Conference Board of Canada Forecast While almost all sectors improved in 213, growth was mostly boosted by the energy sector as primary and utilities output grew by five per cent. This is the most important sector in Calgary s economy as it is responsible for more than 3 per cent of the region s GDP. Growth is expected to continue in all areas in 214. However, the strongest gains are expected in manufacturing, construction and business services. INDUSTRY SHARE BY TOTAL GDP 35% 3 25% 2 15% 1 5% Primary and Utilities Construction 213 Manufacturing Wholesale and Retial Trade Transportation and Warehousing Information and Cultural Industries Finance, Insurance and Real Estate Business Services Non-commercial Services Personal Services Public Administration Source: Statistics Canada, Conference Board of Canada Forecast CREB 214 Economic Outlook & Regional Market Forecast - mid year update 9
employment The Calgary area generated more than 48, full- and part-time jobs over the past two years; 96 per cent were full-time. Another 18, jobs are expected in 214, a 2.3 per cent gain year-over-year CALGARY CMA EMPLOYMENT GROWTH Y/Y % Change 1 Average Annual Employed 9, 8% 6% 4% 2% 3.73% 2.89% 2.33% 85, 8, 75, 7, 65, 6, 55, -2% 23 24 25 26 27 28 29 21 211 212 213 214F 5, % Change (Y/Y) Total Employment Source: Seasonally adjusted data, Statistics Canada, Conference Board of Canada Forecast Business services represent more than 16 per cent of the total employment share within the Calgary CMA, and in 213 recorded the largest increase in new positions. After the first half of 214, employment gains have been strongest in the personal services and construction sectors. EMPLOYMENT SHARE BY INDUSTRY CALGARY CMA 18% 16% 14% 12% 1 8% 6% 4% 2% Primary and Utilities Construction 213 Manufacturing Wholesale and Retial Trade Transportation and Warehousing Information and Cultural Industries Finance, Insurance and Real Estate Business Services Non-commercial Services Personal Services Public Administration Source: Statistics Canada, Conference Board of Canada Forecast 1 CREB 214 Economic Outlook & Regional Market Forecast - mid year update
net migration Employment opportunities in the Calgary region supported a 4.3 per cent population growth in 213. Most of this growth was in the form of net migration. Based on Conference Board of Canada estimates, a record 45, people moved to the census metropolitan area (CMA) in 213. This follows the previous record set in 212 with 3, net migrants, and was well above typical levels for the Calgary CMA. As other provincial economies improve, migration levels in the city are expected to ease to just under 18, this year. While this is a significant drop compared to last year, it is more comparable to long-term averages. Nonetheless, the influx of people into the census area over the past two years will continue to support housing demand growth for the remainder of 214. CALGARY CMA NET MIGRATION 5, 45, 4, 35, 3, 25, 2, 15, 1, 5, 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214F Source: City of Calgary Census, City of Calgary Forecast CREB 214 Economic Outlook & Regional Market Forecast - mid year update 11
calgary housing market rental Strong net migration has reduced rental vacancy rates and driven up rental rates. April rental rates in the Calgary CMA increased by five per cent over April 213, while vacancy levels remained relatively tight at 1.4 per cent, according to the most recent CMHC survey in spring 214. Rising rental rates and fewer options have encouraged consumers to consider ownership. As a result, affordable housing products in the resale market have been the most competitive over the past year. Increased rental construction and improving supply in the condominium sector may reduce some of the pressure on the rental market. However, given the influx of net migrants over the past two years, tight rental market conditions will likely persist into 215. new home Tight market conditions in the resale market combined with rising prices has supported growth in the new home sector over the past two years. Starts in 213 totalled 12,584 units, a two per cent decline over the previous year as multi-family construction pulled back from near record-setting levels set in 212. Single-family starts totaled 6,42 units in 213, a 7.4 per cent increase compared to 212. After the first five months of 214 total starts reached 6,887 units, a 48 per cent increase compared to the same period the year prior. Current gains are related to the surge in the multi-family starts and continued gains in the single-family sector. Despite the increase in overall housing starts, product currently under construction is still below historical highs and inventory levels remain below historical norms. CALGARY CMA NEWLY COMPLETED AND UNOCCUPIED 1,8 1,6 1,4 1,2 1, 8 6 4 2 1 2 3 4 5 6 7 8 9 1 11 12 13 Single Family Multi Family Source: CMHC 12 CREB 214 Economic Outlook & Regional Market Forecast - mid year update
new home continued CALGARY CMA HOUSING STARTS SINGLE FAMILY 12, 1, Y/Y % Change 8, 6, 7% 13% 4, 2, - 21 22 23 24 25 26 27 28 29 21 211 212 213 214F Source: CMHC, Conference Board of Canada Forecast CALGARY CMA HOUSING STARTS MULTI FAMILY 8, 7, 6, Y/Y % Change 63% 17% -1 5, 4, 3, 2, 1, - 21 22 23 24 25 26 27 28 29 21 211 212 213 214F Source: CMHC, Conference Board of Canada Forecast Overall, starts are forecasted to increase by 14.7 per cent by the end 214 for a total of 14,437 units. Half of those starts are expected to be multi-family product. Based on migration growth and resale market supply, overall excess supply due to new construction in is not expected in 214. CREB 214 Economic Outlook & Regional Market Forecast - mid year update 13
resale Sales activity in Calgary s resale market for the first half of 214 increased to 13,929 units, a 13.6 per cent increase compared to 213. While double-digit sales growth is appearing to be the norm, the key difference this year has been higher supply levels. In June, citywide year-over-year inventory levels increased for the first time since February 211. While market conditions continue to remain tight, this does point to a shift in our market. Overall sales activity in the Calgary market picked up in the second quarter as there was a corresponding increase in new listings. In fact, second-quarter listings increased above long-term trends, and outpaced sales growth for the first time since 211. CALGARY SALES AND LISTING GROWTH 8 6 4 2-2 -4-6 1 2 3 4 5 6 7 8 9 1 11 12 13 14 12 per. mov. avg. (new listings growth y/y) 12 per. mov. avg. (sales growth y/y) Source: CREB The rise in new listings relative to the sales growth helped support small gains in inventory levels. While never dropping to historical lows, the increase relative to sales activity should help push the market into more balanced conditions as we move throughout the year. CALGARY MONTHLY COMPARISON ESTIMATED ACTIVE LISTINGS 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, Jun 4 Jun 5 Jun 6 Jun 7 Jun 8 Jun 9 Jun 1 Jun 11 Jun 12 Jun 13 Jun 14 Single family estimated inventory Apartment estimated inventory Townhouse estimated inventory Source: CREB 14 CREB 214 Economic Outlook & Regional Market Forecast - mid year update
resale continued The rise in new listings was partly due to increases in prices. Unadjusted benchmark prices recovered to pre-peak levels in October 213, the first time in nearly six years. For some consumers, this provided equity gains and encouraged them to take advantage of current rising prices to either upsize or downsize their home. Total benchmark prices in Calgary averaged $443,5 by the end of June, a 1 per cent increase over the previous year. While rising listings were expected to ease some market pressure, record migration levels created a more prolonged period of stronger-than-expected housing demand, delaying a more balanced market and fostering continued price growth. While indicators such as the sales-price-to-list-price ratio, days on market and sales-tonew listings ratio all trended toward tighter market conditions, none of them tightened to levels recorded during the last boom, supporting our analysis that the housing market today continues to remain different then the 26-7 period. Moreover, recent movements in these figures point to a trend of easing tightness. CALGARY MONTHS OF SUPPLY AND PRICE CHANGES 6 7 5 6 5 4 4 3 3 2 2 1 1-1 1 2 3 4 5 6 7 8 9 1 11 12 13 14-2 Months of supply trend (12 mo.) Benchmark y/y price change Source: CREB CREB 214 Economic Outlook & Regional Market Forecast - mid year update 15
resale continued In the second half of 214, sales growth is expected to level off as the market comes down from highs recorded during the second half of 213. While annual sales growth is expected to remain higher, the remainder of 214 will be in stark contrast to the first half of the year. On an annual basis, sales activity is expected to total 24,772 units, a 5.53 per cent increase over 213 figures. Meanwhile, recent price gains are expected to support the upward trend of new listings, helping push the market toward more balanced conditions and easing price growth in the second half of this year. However, due to strong gains in the first half of the year, annual benchmark prices are expected to average $444,66, an 8.7 per cent increase over 213 figures. CALGARY SALES AND PRICE GROWTH FORECAST 3, 25, 2, 15, 1, 5, 23 24 25 26 27 28 29 21 211 212 213 214F 5 4 3 2 1 1-2 Single Family Sales 1 yr Average Apartment Sales City of Calgary Price Growth Townhouse Sales Source: CREB single family The single-family market moved into sellers territory in 213 and has remained there ever since. Stronger-than-expected migration levels, employment and wage growth and low lending rates resulted in demand growth that outpaced new supply additions. Moreover, sales levels were restricted by the lack of choice, especially in the lower price ranges. While price gains were anticipated, persistently tight market conditions in this sector have driven up prices at a faster-than-expected rate. On a monthly basis, unadjusted single-family home prices recovered from previous highs in April 213. However, monthly benchmark prices have steadily increasing reaching $59,7 in June 214. New listings also gained speed this past spring after increasing throughout the second half of 213. However, sales growth outpaced new listings growth, resulting in continued tightness in the market. 16 CREB 214 Economic Outlook & Regional Market Forecast - mid year update
single family continued CALGARY PRICE AND LISTINGS GROWTH SINGLE FAMILY 8 6 4 2-2 -4-6 1 2 3 4 5 6 7 8 9 1 11 12 13 14 New listings y/y change Benchmark price growth Source: CREB While new listings in the resale market improved, the gains largely occurred in higher price ranges. Listings are expected to continue to rise in this sector, while availability in the lower price ranges will likely decline. As a result, the single-family market may demonstrate different behaviours depending on the price range. CALGARY YTD NEW LISTINGS BY PRICE RANGE SINGLE FAMILY 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 <$2, $2, - $299,999 $3, - $399,999 $4, - $499,999 $5, - $599,999 YTD June 211 YTD June 212 YTD June 213 YTD June 214 $6, - $699,999 $7, - $999,999 $1,,+ Source: CREB Year to date Moving forward, buyers looking for more affordable product are expected to shift their attention to the condominium market and surrounding areas due to fewer choices in Calgary s lower-priced single-family market. Overall, single-family sales in the city are expected to increase by 3.9 per cent in 214 to 16,928 units. Price gains, albeit slower in the second half of the year, will continue to support a rise in new listings and help move Calgary s single-family housing market toward more balanced conditions by the end of 214 and into 215. Overall, single-family prices are expected to increase by 7.89 per cent for an annual average benchmark price of $494,154 in 214. Note: One factor to consider is the supply coming from the new home sector. While single-family starts improved during the first half of 214 and are forecast to continue throughout the year, the levels continued to be well below pre-recession averages. This is in contrast to multi-family starts, which were not only comparable to prerecession construction, but accounted for nearly half of total starts in Calgary from uary to June. Longer term, this will continue to impact the share of singlefamily sales relative to the entire market. Single-family sales and new listings in the first half of 214 represented 67 per cent of new home activity in the city, down from 7 per cent in 213. CREB 214 Economic Outlook & Regional Market Forecast - mid year update 17
single family continued CALGARY SALES AND PRICE GROWTH FORECAST SINGLE FAMILY 2, 18, 16, 14, 12, 1, 8 6, 4, 2, 23 24 25 26 27 28 29 21 211 212 213 214F 5 4 3 2 1-1 Single family sales 1 yr average Price growth Source: CREB condominium Tight rental markets and declining supplies in the lower-priced single-family market boosted demand for condominium product during the first half of 214. Condominium apartment sales totalled 2,494 units, a 23 per cent increase over the same time last year. The sector s strength was not limited to the apartment-style units, either. After the first half of the year, condominium townhouse sales increased by 2 per cent for a total of 2,9 sales. CALGARY YTD COMPARISON SALES YTD-JUN 3,5 3, 2,5 2, 1,5 1, 5 YTD 4 YTD 5 YTD 6 YTD 7 YTD 8 YTD 9 YTD 1 YTD 11 YTD 12 YTD 13 YTD 14 Apartment Townhouse Source: CREB New listings for condominium apartments had been declining for the better part of the past three years, which helped reduce the excess inventory and support price gains in the sector. However, market conditions did not move into sellers territory until the later part of 213, at which time price growth increased. While price gains have been higher than expected so far this year, it is important to note that it wasn t until June 214 that unadjusted monthly benchmark prices for condominium apartments recovered from previous highs. 18 CREB 214 Economic Outlook & Regional Market Forecast - mid year update
condominium continued CALGARY BENCHMARK PRICE AND GROWTH APARTMENT 8 35, 7 6 3, 5 4 3 25, 2, 2 1 15, 1, -1-2 5, -3 1 2 3 4 5 6 7 8 9 1 11 12 13 14 Benchmark price growth Benchmark price Source: CREB So far in 214, new listings in the condominium market have improved, and even exceeded, sales growth, pushing up inventory levels and creating more balanced conditions. While price gains continue to be relatively strong, this should ease price growth moving into the second half of 214. CALGARY ANNUAL SALES AND LISTING GROWTH APARTMENT 12 1 8 6 4 2-2 -4-6 1 2 3 4 5 6 7 8 9 1 11 12 13 14 12 per. mov. avg. (new listings growth y/y) 12 per. mov. avg. (sales growth y/y) Source: CREB Demand for condominium apartment product is expected to remain strong for the remainder of the year as tight rental market conditions, combined with low mortgage rates, encourage ownership in this typically more affordable sector. Sales are expected to total 4,46 units in 214, a 1 per cent increase over the previous year. While sales activity is expected to remain relatively strong, so too will new listings, helping further push the market into balanced territory. This should limit some of the pressure on price appreciation. Overall, average annual condominium apartment benchmark prices are expected to increase by 8.8 per cent to $289,789 in 214. CREB 214 Economic Outlook & Regional Market Forecast - mid year update 19
condominium continued The condominium townhouse sector has also benefited from rising demand. The recent rise in listings has helped improve inventory levels. However, unlike the apartment sector, the townhouse market continues to remain relatively tighter. Furthermore, despite steady gains in prices, monthly unadjusted benchmark prices continue to remain just below peak levels. Moving forward, new listings are expected to rise, helping ease market tightness. However, strong demand will likely create persistently tight conditions until later in the year, resulting in further price gains in this market. Overall, the annual average benchmark price is expected to total $318,267 in 214, an eight per cent increase over the previous year. CALGARY CONDOMINIUM PRICE COMPARISON 1 8% 6% 4% 2% -2% -4% $266,35 $289,789 $318,267 $294,692 $277,167 $244,992 $239,817 $269,892 211 212 213 214F $5, $45, $4, $35, $3, $25, $2, $15, $1, $5, $ Apartment price growth Apartment benchmark price Townhouse price growth Townhouse benchmark price Source: CREB note: flood update According to a City of Calgary assessment, 1,939 properties required an adjustment to their assessments due to the flood, representing less than.4 per cent of the residential properties in Calgary. The small share would not influence citywide aggregate figures. Yet there can be some impact at a community level as these properties come back onto the market. Many questions remain unanswered regarding the long-term impacts in flood-affected areas. Much of this will continue to depend on risk-mitigation measures and time without another incident. Last year s flood prompted a pullback in demand in impacted areas. However, demand is returning. This shouldn t come as a surprise as many of these communities are in close proximity to downtown. Calgary has also been fortunate to benefit from strong migration, creating tight supply and a rising property market. What is not clear is the flood s impact on home values. Many of the inner city homes were sold as a redevelopment opportunity, which could provide significant uplift to many ageing properties. However, there is not enough information to clearly indicate what, if any, value depreciation is applied after remediation. 2 CREB 214 Economic Outlook & Regional Market Forecast - mid year update
note: data changes coming in 215 As CREB continues to work to improve the integrity and quality of its data, it will be making adjustments to better reflect the type of product being measured. This will include a shift toward measuring detached, attached, and apartment-style product. All historical data will be adjusted based on the new classifications. In addition, CREB will also be improving its regional data by reporting on areas where its membership is focused. This will result in more reliable trends in surrounding areas. One final change is CREB will be adding the Calgary CMA classification as defined by Statistics Canada. This will allow analysts to better compare economic indicators to CREB resale market data. Forecast Risk Economic risk continues to be tied to weaker-than-expected growth in developing economies and a sharper-than-anticipated slowdown in China. This could impact the financial market, place downward pressure on commodity prices and impact exports and overall growth expectations. Alberta continues to have risk regarding market access for energy products. While the use of rail had aided in relieving some bottlenecks, long-term growth will be dependent on market access and price volatility for commodities. With no pressure on near-term lending rates, concerns about affordability due to rising prices will be cushioned by rising incomes. However, a setback in the economic climate, particularly in the energy sector, could have a larger-than-expected impact on demand. Much of the housing risk continues to lie with supply levels, which have improved. Yet if the pace of growth does not meet demand then price gains could continue at higherthan-expected rates. Concern also lies with a possible disconnect between consumer demand and available supply. This could result in some pockets of the market being oversupplied and others being undersupplied, impacting aggregate price gains. CREB 214 Economic Outlook & Regional Market Forecast - mid year update 21
forecast summary Economic Indicators 211 212 213 214 (F) Forecaster Calgary GDP Growth 5.38% 3.94% 3.71% 3.41% Calgary CMA Net Migration 1,861 31,996 45,168 17,54 Calgary Employment Growth 2.96% 3.73% 2.89% 2.33% Average Residential Mortgage Lending Rate 5 year 4.57% 4.24% 4.17% 4.49% Housing Starts: Single Family 5,84 5,961 6,42 7,25 Housing Starts: Multiple Family 4,28 6,88 6,182 7,232 Apartment Rental Rates** 1,84 1,15 1,224 1,29 CMHC Apartment Vacancy Rates** 2. 1.3 1. 1.2 CMHC Conference Board of Canada Conference Board of Canada Conference Board of Canada Conference Board of Canada Conference Board of Canada Conference Board of Canada WTI Price 94.87 94.11 97.91 98.67 Henry Hub Price 3.99 2.75 3.73 4.91 U.S. Energy Information Administration U.S. Energy Information Administration **Figures based on October Survey, 213 represent actual figures MLS Resale Market 211 212 213 214 (F) Forecaster City of Calgary Sales 18,494 21,22 23,475 24,722 (5.5% ) CREB Price Growth -1.23% 5.43% 7.87% 8.7% (444,66*) CREB New Listings 34,68 31,844 32,153 34,839 (8.4%) CREB City of Calgary Single Family Sales 13,118 15,15 16,294 16,928 (3.9%) CREB Price Growth -.68% 6.65% 7.84% 7.9% (494,154*) CREB City of Calgary Condominium Apartment Sales 3,139 3,5 4,5 4,46 (1.) CREB Price Growth -2.48% 2.16% 8.72% 8.8% (289,789) CREB City of Calgary Condominium Townhouse Sales 2,237 2,598 3,176 3,438 (8.25%) CREB Price Growth -2.63% 2.7 6.32% 8. (318,267*) CREB *Benchmark Price 22 CREB 214 Economic Outlook & Regional Market Forecast - mid year update
references Alberta Energy Regulator - Alberta s Energy Reserves and Supply / Demand Outlook, ST98 214 Baytex Energy Corp Q2 214 Heavy Oil Pricing Update July, 214 Bank of Canada Monetary Policy Report July 214 CAPP Crude Oil Forecast, Markets & Transportation June 214 CMHC Housing Market Outlook - spring 214 CMHC Rental Market Report, Alberta Highlights spring 214 Government of Alberta Economic Outlook: Fiscal Plan 214-17 International Monetary Fund World Economic Outlook: Recovery Strengthens, Remains Uneven April 214 RBC Research - Economic and Financial Market Outlook, June 214 RBC Research - Provincial Outlook June 214 RBC Economics Research: Housing Trends and Affordability May 214 TD Economics - Quarterly Economic Forecast Canadian Economic Outlook, June 23 TD Economics - Canadian Quarterly Regional Housing Report, July 3, 214 TD Economics Canadian Provincial Economic Forecast, July 8, 214 The Conference Board of Canada Calgary: Metropolitan Outlook 1, Spring 214 U.S. Energy Information Administration (EIA) - Short-term energy outlook, July 8, 214 CREB 214 Economic Outlook & Regional Market Forecast - mid year update 23
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