Calgary home prices expected to keep climbing, even as hot market eases from record levels

Calgary's hot housing market is expected to ease from last year's record levels, but prices are forecast to continue rising as the market remains at stronger-than-historical levels, says a new industry outlook.

The Calgary Real Estate Board's annual forecast says rising lending rates and home prices are likely to slow demand growth, but the board anticipates citywide prices to increase by over four per cent in 2022.

A four-per-cent hike in CREB's benchmark price of a detached home in Calgary would represent a $21,179 bump to $549,662 this year, up from $528,483 last year.

"Overall, [sales] levels are expected to remain much higher than long-term trends, reflecting a strong demand environment," according to the report released Tuesday.

"As we move through the economic recovery, and job prospects improve, demand for resale housing will remain relatively strong."

CREB believes sales will still be strong because many were able to save more money during the COVID-19 pandemic. The board is forecasting the city will record 25,598 sales this year, down from 27,686 last year but up from 16,149 in 2020.

"The challenge in 2022 is expected to be related to supply," it said. 

"Starts activity did improve last year, which should help with overall housing supply in 2022, but resale supply may struggle to remain at adequate levels to support balanced conditions throughout the earlier part of the year."

The board said that as the supply-demand balance gradually improves, upward price pressure in the housing market should ease.

But CREB chief economist Ann-Marie Lurie cautioned that while conditions in the housing market are expected to remain strong, "there is a significant amount of uncertainty that could impact housing."

"If supply levels remain low relative to demand, we could see stronger-than-expected price growth," she said in a release. 

"On the other hand, if rates rise much faster and higher than expected, it could cause a more significant pullback in sales."

CREB's outlook is in keeping with other recent reports on the housing market.

Last month, a PricewaterhouseCoopers report on real estate trends in Canada said housing sales activity in the city is a reflection of an improving economic outlook.

"Conditions are especially tight for detached homes — and builders are responding to this demand, particularly on the outskirts of Calgary," it said.

The Conference Board of Canada forecast housing starts in the city will rise to 11,950 in 2025, up from 9,448 in 2021.

Many potential homebuyers may be watching to see what the Bank of Canada decides to do about interest rates on Wednesday.

Expectations are growing that central banks will soon have to raise their interest rates to keep a lid on inflation, which has run up to the highest level seen in decades.

"We know rate hikes are coming — the question is, is it tomorrow or is it in March?" said Charles St-Arnaud, chief economist at Alberta Central, the central banking facility for the province's credit unions.

"My view is that I feel the Bank of Canada may want to wait to March. But again, you could toss a coin and that will be the result."

St-Arnaud's expectation is that once the central bank starts increasing rates, it will increase rates by 25 basis points for three consecutive meetings and then probably one more time before the end of the year.

"For a total increase of about one percentage point in the interest rate this year," he said.

Last month, the Bank of Canada opted to keep its benchmark interest rate steady at 0.25 per cent, noting that Canada's economic recovery from COVID-19 is proceeding in line with expectations.

St-Arnaud said Canadians are already seeing some of the anticipated increase being reflected in "slightly higher" mortgage rates in recent months.