Alberta's hot real estate market will cool swiftly in 2015 as new projections show prices increasing only slightly or staying stable over the next year due to the collapse in oil prices.
In its forecast of the housing market over the next year, real estate giant Royal LePage expects prices in Edmonton and Calgary to grow by 2.5 and 2.4 per cent respectively this year – both significantly below the national average of 2.9 per cent.
"The Alberta market was the hottest in Canada in 2014," Royal LePage chief executive Phil Soper told The Globe and Mail. "As a result, we would have seen a cooling of the market regardless. However, with the precipitous drop in oil prices at the end of 2014, we revised our forecast to see significant slowing."
While households in Quebec or the Maritimes would be pleased with the 2.5-per-cent price growth expected in Alberta over the next year, it's a sudden reversal for the province. In 2014, the price of a two-storey house surged by 9.4 per cent in Edmonton and 8.5 per cent in Calgary.
As the economic engine sputters, job losses, delayed energy projects and looming budget cuts are creating uncertainty for homeowners. Despite the dire news out of the oil patch, prices are being sustained by pent-up demand from years of fast population growth and a dire lack of rental accommodations.
The chief economist for the Calgary Real Estate Board expects that oil prices rebounding in the second half of 2015 will help house prices increase by 1.5 per cent over the next year. If the price of oil doesn't recover quickly, prices will struggle to remain stable, Anne-Marie Lurie says. "If energy prices don't start to improve, it'll have a greater-than-expected impact on employment and then the housing market," Ms. Lurie said.