Comparing Calgary's current downturn to history

Calgary's infamous boom-bust economy is at it once again.

Just as it did in the 1980s and late-2000s, economic conditions have once again turned sour.

But does this downturn feel different from those that came before?

Yes, says CREB® chief economist Ann-Marie Lurie.

In CREB®'s 2016 Economic Outlook & Regional Housing Market Forecast, Lurie notes that while some have tried to compare this year to the early 1980s – in terms of its perfect storm of low oil prices and high unemployment – the underlying conditions are, in fact, much different.

The year according to CREB®'s Ann-Marie Lurie

With the calendar set to turn on what's been a turbulent year in the city's real estate industry, many will wondering what to expect in 2016 and beyond. To help provide a little clarity on just how we got here, as well as a hint as to where we're headed, CREB®Now enlisted CREB® chief economist Ann-Marie Lurie to provide some end-of-year insight.

CREB®Now: ?How would you sum up 2015 in Calgary real estate?

Lurie: It has been a year of weaker demand – definitely challenging economic times resulting in weaker demand. As a result there has been some more inventory than we are used to in the market and there has been some downward regression on pricing. It's completely consistent with what the economic situation has been.

Speaking as part of Calgary Economic Development's (CED) 2016 Economic Outlook, Bank of Canada governor Stephen S. Poloz laid out his forecast for Canada's economy in the upcoming year.
With more than 1,500 on hand for the presentation, Poloz touched on some of the factors that have seen Canada's economy get off to a less-than-stellar start this year.
CREB®Now takes a look at some of the key points from CED's outlook.

GDP
Having seen two consecutive quarters of GDP decline, Canada's economy currently fits the definition of being in a recession. Looking forward, TD forecasts call for an annual growth rate of
1.2 per cent in 2015, followed by two per cent gains in 2016 and 2017.

Employment
Speaking on downsizings in Calgary's energy sector, CED president and chief executive Mary Moran said more layoffs should be expected, calling it the most challenging time for the city since the mid-1980s. ATB economist Todd Hirsch has predicted unemployment rate in the province could reach 7.5 per cent, which would be the highest rate seen since 2009.

ATB Financial chief economist Todd Hirsch recently spoke at CREB®  to outline some of his predictions for Alberta in 2016. During the talk, Hirsch discussed some causes for the current state of the provincial economy and factors that will need to change before Albertans see a rosier economic picture. CREB®Now examines some of the main talking points discussed during his visit.

Earnings:

Rather than simply pointing out the decline in the price of oil, Hirsch focused on the wages being earned by some Albertans as one of the factors affecting Alberta's current situation. Playing a massive role in province's employment picture, the average weekly earnings for Albertans had improved by 48 per cent over the last 10 years compared to 29 per cent nationally, with workers in the energy sector taking home 56 per cent more than a decade ago.

As Canada Mortgage and Housing Corp.'s market analyst for Calgary, Richard Cho is tasked with keeping tabs on the housing market in one of Canada's most dynamic cities.

CREB®Now caught up with Cho to talk about the economy, what's in store for Calgary's real estate sector and why he enjoys calling the city home.

CREB®Now: ?How are current energy prices affecting the city of Calgary?

CHO: A large part of Calgary's economy is tied to the performance of the energy industry. The decline in oil prices has posed some challenges for many oil companies, resulting in reductions to capital expenditures, hiring freezes, and layoffs. This has also impacted many other industries, from large companies to small business owners, that either directly or indirectly benefit from the energy sector. While there are still areas of Calgary's economy that are holding steady and creating jobs, overall economic activity is expected to slow down this year.

Oil prices to impact commercial, retail and industrial sectors

Declining oil prices are expected to create added challenges for Calgary's commercial market over the next 12 to 24 months, according to a new report from commercial real estate firm Avison Young.

Yet, the report also notes that because the city is home to one of the "most productive and best-paid workforces in the country" where average weekly earnings increased 5.1 per cent year-over-year to August 2014, the long-term outlook for the local business community is still positive.

A 'fantastic' year for Calgary businesses despite dropping energy prices

Despite plummeting oil prices, commercial activity in Calgary remained robust throughout 2014, creating what many industry analysts are calling one of the most competitive markets in Canada heading into the new year.

"I think it's been a fantastic year despite the last quarter of the challenging energy prices. We had some great revenue streams that were available for the first three quarters of the year," said Calgary Chamber president and CEO Adam Legge.

"Building projects are strong. You see some of the new towers going up in the downtown. You've got a lot of major infrastructure projects.