Rising lending rates have had a notable impact on the housing sector, prompting potential buyers to search for more affordable housing options. Simultaneously, some potential sellers have refrained from listing their homes to avoid the consequences of higher rates. The decrease in new listings at lower price points has likely hindered overall sales activity, particularly as lower-priced properties contributed to declines in sales during 2023. Despite a moderation from record-high levels, strong migration growth and a robust labour market have kept sales well above long-term trends.
While international migration has influenced rental markets, resulting in increased rental gains and heightened demand from investors, interprovincial migration from higher-priced markets in British Columbia and Ontario has helped support sales growth in the higher price ranges of our market, even in the face of higher lending rates.
Moving into 2024, we anticipate that potential buyers who were previously on the sidelines due to limited supply choices may reenter the market as lending rates ease and listings improve.
At the same time, with more mortgages set to renew, we could see some gains in resale listings as existing homeowners who were previously hesitant to change their housing situation may be motivated to capitalize on rising prices and favourable seller market conditions. The combination of improved listings and heightened activity in the new home sector is anticipated to foster some growth in overall supply. However, given the persistent strong demand driven by recent migration and a healthy job market, it will take time for supply levels to rise sufficiently to restore balance to the market.
Although conditions are not expected to be as tight as in 2023, a seller’s market is projected to persist throughout the spring market, resulting in further price growth. However, the rate of growth for each property type is anticipated to slow compared to 2023 levels. Supply growth is expected to be mostly driven by the upper price ranges for each property type, which will likely decelerate the pace of price growth for higher-priced properties. Meanwhile, conditions are expected to remain tight for lower-priced properties, contributing to continued price gains.
HOUSING SUPPLY NEW HOME AND RENTAL IMPACT
The sudden and sharp rise in international migration has played a significant role in driving up demand for rental properties. This surge in rental demand has led to a decrease in supply and substantial increases in rental rates since 2022. The heightened rents have also spurred demand in the resale market, as both renters and investors actively pursued available resale properties.
Limited supply choice in the resale and rental markets supported stronger home starts activity in 2023. In the Calgary census metropolitan area, 2023 housing starts are on pace to hit record levels. Most starts have been in the apartment sector, with over half of the units targeted toward purpose-built rental.
Gains in new home starts for rental and ownership will help provide more choice in the market, helping shift the resale market away from the extreme seller’s market conditions we have faced over the past year. However, the supply growth will take time and is contingent on the migration flow into the city and the development process.
Please read the full forecast here.
