The worst is over

Economic growth forecasts paint cautiously optimistic picture for Calgary housing market

Calgary's housing market lives and breathes based on the whims of the city's overall economy.

While the city had an impressive gain of 6.9 per cent in economic growth in 2017 compared to 2016, according to the Conference Board of Canada, the economic engine will slow down this year and in 2019.

The board is forecasting Real GDP growth of 2.5 per cent in 2018, followed by 2.1 per cent next year.

It's a sign that the housing market will remain challenged going forward. In the early part of this year, MLS® System sales were hovering just under 20 per cent off the pace set last year, while the average sale price was down just over one per cent.

The good news for the housing market is that improved oil prices in 2017 and into 2018 pushed Calgary's economy out of the doldrums of 2015 and 2016, when annual contractions in the mid-three-per-cent range set the city back.

"These dips were the first back-to-back contractions since at least the late 1980s and inflicted considerable economic pain," reads the Conference Board's most recent Metropolitan Outlook. "Last year's strong rebound was accordingly welcome, although we estimate it did not quite recoup the two real GDP losses. That task will be accomplished this year..."

What is also good news for the housing market is the employment picture. The job situation in any market is going to determine the health of housing sales. This, too, is looking up.

The Conference Board is expecting moderate employment growth of one to two per cent annually for the next few years.

Calgary's soft job market and GDP growth sharply reduced net migratory inflows – "perhaps the most visceral of all economic indicators." Net interprovincial migration took the biggest hit. After attracting an average of nearly 7,700 people annually from other provinces in the 10 years leading up to 2015, Calgary saw over 1,600 people leave on average in 2016 and 2017. This put net in-migration at about 14,500 people last year, compared with an average of about 23,400 the previous decade.

"The worst appears to be over," according to the Conference Board. "Although net interprovincial outflows will continue over the next few years, they will be greatly diminished starting this year and will subsequently ease further. This will help sustain Calgary's annual population growth at just under two per cent throughout the forecast period."

Economic growth plus employment growth plus population growth equals what appears to be a positive formula for Calgary's resale housing market as it moves into the second half of 2018 and then into 2019.