The Alberta economy continues to struggle. 2019 marks the fifth year since oil prices first collapsed. Following widening price differentials and continued difficulties getting energy product to market, we saw governments step in with production curtailments. This helped narrow the spread on price, likely preventing further pullbacks, but it also weighed on energy investment activity and overall economic growth.
The continued challenges have caused Alberta to move into the category of slowest growing economy in 2019 compared to other provinces. Shifts to ease curtailments in 2020 and additional transportation capacity are expected to support some economic growth this year. However, global risk will likely create volatility in oil prices and Investment activity is not expected to change, remaining at half the levels that were seen prior to the 2014 oil price crash.
While several mechanisms have been put in place by the provincial government to encourage business investment and support diversification, at the same time, recent budget constraints could impact growth in the public sector. The shifts to encourage business investments will likely take longer to take hold, while the easing in the public sector will be more immediate. The result is an economy that is expected to be marginally better in 2020, keeping housing markets stable at lower levels in 2020.
TOP CONSIDERATIONS FOR 2020:
• A new normal in the market: supply adjusting to slower sales activity, providing conditions that are more supportive to a stable price environment.
• Market improvements are expected to be driven by gains for lower priced product, while easing prices and oversupply persist in the upper price ranges.
• Supply adjustments are expected to continue, helping to eventually push the market toward balanced conditions.
• Prices are expected to stabilize over the year, but remain just slightly lower than last year’s annual levels.
• Stable mortgage rates, previous price declines and job growth should support modest improvements in sales, but these will remain at lower levels.
• Employment risk weighs on the market, which could result in further declines in sales and prices.
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