ForecastReportMidYear 2015 - · PDF file 2015 GDP forecasts for Canada have been revised...

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Transcript of ForecastReportMidYear 2015 - · PDF file 2015 GDP forecasts for Canada have been revised...

  • 2015 economic outlook &

    regional housing forecast

    MID-YEAR UPDATE

  • ©2015 CREB®. All rights reserved.

    The forecasts included in this document are based on information available as of June 2015. Prepared by Ann-Marie Lurie, CREB® chief economist.

    300 Manning Road NE Calgary, Alberta T2E 8K4, Canada

    Phone: 403-263-0530 Fax: 403-218-3688 Email: [email protected]

    creb.com crebforecast.com crebnow.com

  • contents

    summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

    energy sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

    economic overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 International Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Canadian Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Alberta Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Calgary Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Calgary Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Net Migration and Population Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

    calgary & surrounding area housing market . . . . . . . . . . . . . . . . . . . . . . . . 11 Rental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 New Home . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

    resale market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Total Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 The Detached Segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 The Apartment Segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 The Attached Segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Airdrie . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Rocky View County . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Region of Foothills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

    outlook risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

    Forecast table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

    CREB® 2015 EConomiC outlook & REgional maRkEt FoRECast - mid yEaR updatE 3

  • >> It was a turbulent first half of the year for Calgary’s regional housing market. Low energy prices impacted consumer confidence early in the year, causing a significant pullback in sales and a sharp rise in supply levels. As we moved into the second quarter, there was some calming in the housing market. This change was partially driven by easing concerns over the likelihood of worse case scenarios of $30 US per barrel oil prices.

    While the initial shock of declining oil prices has dissipated, housing market activity is likely to be guided by economic realities in the second half of the year. The long-term outlook continues to remain optimistic, but short-term expectations have changed from the previous forecast. This is related to slower than anticipated recovery of oil prices and the impact that it’s having on Alberta’s economy.

    Many economists warn that the broader eects of oil price shocks have yet to be fully realized in both the energy and non-energy sectors. Even with no further changes, most sectors are likely to face more downward pressure in the second half of 2015 and into 2016.

    West Texas Intermediate (WTI) price forecasts for 2015 are now expected to average $55 US per barrel, according to the U.S. Energy Information Administration’s (EIA) July Short-Term Energy Outlook report. This is nearly 13 per cent lower than expectations from the end of 2014.

    In response to these changes and the impact they are having on capital investment, Alberta GDP growth forecasts for 2015 have been revised down, ranging from a 1.5 per cent contraction to moderate growth of 0.4 per cent. In Calgary, both the Conference Board of Canada and the City of Calgary corporate economics groups anticipate economic growth to contract by more than one per cent in 2015. This will place further downward pressure on employment and migration.

    Despite the recent decline in lending rates, resale housing demand will continue to remain weaker than what we have become accustomed to in Calgary. While declining lending rates typically support demand growth, further job losses are expected in the fall of this

    year. Rising unemployment levels and limited job opportunities far outweigh the benefits of a lower lending rate and will continue to keep housing demand weak in the months ahead. Overall, sales activity in the city is forecasted to decline by 22 per cent for a total of 19,798 units in 2015.

    Meanwhile, the pullback in new residential construction, combined with some moderation of new listings, will help lessen the impact on housing supply. However, inventory imbalances in some sectors of the market are still expected to weigh on housing prices in the second half of the year, causing residential prices to contract by an estimated 0.2 per cent on an annual basis in 2015.

    SUMMARY

    Calgary Sales and Price Growth Forecast

    Source: CREB®

    -20%

    -10%

    0%

    10%

    20%

    30%

    40%

    50%

    0

    5,000

    10,000

    15,000

    20,000

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    30,000

    Detached Price growth10 yr averageApartment Attached

    ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15

    FORECAST

    CREB® 2015 ECONOMIC OUTLOOK & REGIONAL MARKET FORECAST - MID YEAR UPDATE4

  • “The Canadian Crude oil industry is facing risks on multiple fronts in a market transformed by increased global crude oil supplies resulting in lower crude oil prices.” Canadian Association of Petroleum Producers – Crude Oil forecasts, Markets and Transportation, June 2015.

    >> WTI oil prices have improved since the January forecast, but remain below previous expectations. Year-to-date prices have averaged around $50 US per barrel, nearly half of what they averaged last year. At the beginning of the year, consumer confidence was low with WTI prices hovering around $40 US per barrel. However, concerns started to ease as prices improved from those lows. Despite pushing up to $60 US per barrel, recently WTI prices have slid back to below $50 US per barrel. According to the Bank of Canada, the recent fall is related to the developments in Greece, ongoing excess supply and the prospects of Iranian oil exports returning to the market.

    As expected, the drop in oil price has impacted energy industry revenues. The Canadian Association of Petroleum Producers (CAPP) estimates that oil industry revenues will fall by 40 per cent in 2015, with capital investment declining by 38 per cent and well drilling by 45 per cent.

    Despite this decline in investment, oil production is projected to increase over the next three years. Industry experts have indicated that most active projects will continue as many of those capital intensive projects have long-term horizons and are not as susceptible to shorter-term price volatility. Current

    production is also not expected to shut- in, as per barrel operating costs are lower than current market