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A 'persistent oversupply' of homes worth more than $500,000 remains in Alberta's largest city.

TODD KOROL/Reuters

Calgary home prices have dropped by more than 10 per cent in the five years since Alberta’s economic downturn began, and the market is expected to dip down more in 2020 as slower sales and cautious buying become the “new normal” in Alberta’s largest city.

But even as a “persistent oversupply” of homes worth more than $500,000 remains, overall market prices will not drop by much this year, according to the Calgary Real Estate Board’s annual forecast on Tuesday.

The forecast from CREB chief economist Ann-Marie Lurie said that if the economic climate and employment levels do not worsen, and if population growth is steady and lending rates are favourable, the housing market should be more stable in 2020 than in the previous year.

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Prices for all housing types – apartment-style condos, attached and detached homes – dropped an average of 3.4 per cent in 2019. The board forecasts a 0.7-per-cent price decline in 2020. Overall sales activity, which dropped significantly two years ago, could improve slightly.

But a still-weak economy and the possibility of more job losses weigh heavily on Calgary. The unemployment rate is 7.1 per cent, well above the national rate of 5.6 per cent.

“We are settling into a new normal of slower sales, supply choice, limited price growth and a cautious consumer,” the forecast said.

In the first years after the price of oil dropped in late 2014, empty condo units in projects planned when crude prices were high were the biggest sore point in the city’s real estate market.

Today, Calgary still is oversupplied with apartment-style condos. But the problem of more supply than demand for higher-end housing is the new focus of concern. The city’s cohort of well-paid, white-collar workers in oil and gas and related sectors such as finance has been significantly whittled down.

The remaining jobs pay less and most job growth is in lower-paid sectors.

Correspondingly, sales have increasingly been homes costing $500,000 or less. The weak job growth for higher-paying positions – along with stricter lender requirements – have hit demand for homes priced above $500,000. Such residences make up 60 per cent of the Calgary sales inventory, the forecast says.

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“Weakness in the higher-paid sectors of the job market, combined with the uncertainty regarding future job prospects in the city, will continue to create divergent trends in the housing market,” the CREB report said.

Calgary’s real estate market could do better than expected this year if changes to mortgage rules, decreases in mortgage rates, and positive momentum in construction of pipeline projects improve consumer confidence and job prospects.

But the changes may not materialize. The CREB report notes that job growth did get better in 2019, but at the end of the year, Calgary and other parts of the province recorded job losses.

Calgary stands in contrast to Ottawa, a similar-sized Canadian city, where a strong job market meant detached home prices increased by almost 9 per cent in 2019. Just a few years ago, Calgary had significantly higher home prices than the capital. Now, the benchmark price for a single-family home is near identical in the two cities – $466,443 in Ottawa and $467,330 in the Calgary region, according to the CREB report.

Long-time local realtor Len T. Wong said Calgarians have been affected by recent bad news, including layoffs at Husky Energy Inc., Encana Corp.'s decision to move its head offices to Denver and questions about how deep provincial government cuts to public sector spending will go. He said he believes Calgary home prices are likely to drop 3 per cent to 5 per cent this year, significantly more than the real estate board predicts.

“People are waiting and seeing what is going to happen," Mr. Wong said in an interview.

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A shift in mindset is taking place, he added. He’s having to tell potential sellers that if they bought their properties in the past decade, they’re likely to get only the same price they paid, or less.

“It’s something that we’re not used to.”

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