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Weak demand, oversupply to push prices of Calgary homes down at 19: CREB

Attached homes for sale in the Livingstone community with the Calgary skyline in the distance on Wednesday, January 30, 2019. CREB is predicting another difficult year for home sales.

Gavin Young / Postmedia

A United Conservative Party government will urge the federal government to eliminate the mortgage rules that are making it more difficult for residents to buy homes, UCP leader Jason Kenney said on Wednesday.

Speaking to a crowd of hundreds of realtors at the Calgary Real Estate Board's annual forecast event, Kenney said that the mortgage stress test introduced in early 2018 and designed to ensure home buyers can still pay their mortgages, even If interest rates increase substantially, it will be an "unfair attack on Alberta real estate." He said that if he becomes the premier, he will file a motion in the legislature demanding that the federal government remove the Alberta market rules and encourage other provinces. to participate.

"One of the reasons why houses are less affordable in Alberta today is because of the unfair rules imposed by Ottawa to deal with the overheated real estate markets in Toronto and Vancouver," Kenney told reporters. "We (Alberta) did not risk overheating … (Canada Housing and Mortgage Corp.) took out a bazooka instead of a fly-killer to deal with this problem."

Kenney's remarks came after a pessimistic prediction of the 2019 real estate market of CREB, which expects Calgary home prices to fall by an average of 2.3 percent over the year. Expected prices in 2019 are a continuation of a four-year trend of declining sales activity and growing stocks in the Calgary real estate market.

"Some of the factors are really what is happening in the energy sector and how this is impacting confidence," said Ann-Marie Lurie, chief economist at CREB. "And, of course, the main factor is really that labor market. We continue to struggle with high unemployment rates, we do not expect to see much job growth, and this is also weighing on our real estate market. "

Lurie declined to comment on Kenney's proposed mortgage stress test but said stricter lending conditions combined with higher interest rates are another factor that weighed on demand for housing in 2018.

"There is no doubt that more stringent testing has affected the real estate market," Lurie said.

According to the Canadian Real Estate Association, buyers who previously qualified for the average home reference in Calgary would now need to save an additional $ 76,000 to buy the same home as a result of the new mortgage rules.

Cliff Stevenson, a Calgary real estate agent who serves as CREA's regional director for Alberta, said the growing inaccessibility of homes due to new lending rules is not only a concern in this province. He said that CREA has pushed the federal government for a "regionalization" of mortgage stress testing across the country.

"We agree with the federal government on the need to cool the two major real estate markets in Toronto and Vancouver … but we are very attuned to the struggles of many regions in Canada that have been heavily affected by stress testing and are already experiencing a slowdown in their real estate markets, "Stevenson said.

The mortgage stress test, which aims to reduce the amount of debt owners and financial institutions can assume, applies to all buyers of Canadian homes – even those who make a payment of 20 percent or more. Kenney said the rules made sense to Toronto and Vancouver, where real estate speculation has been excessive, but should have been applied in a "geographically driven" way.

He added that the UCP is also interested in working with provincial credit unions and ATB Financial agencies to help Alberta buyers take parallel measures. Only creditors regulated by the federal government are required to apply the stress test, although many other lenders have voluntarily applied the test.

Speaking to reporters in Calgary on Wednesday, Premier Rachel Notley said that asking for removal of the mortgage stress test for Albertans is something the NDP government could "investigate" but she warned that the Albertans do indeed have a high level of other Canadians. .

"We need to be careful not to find ourselves in a situation where people are taking on debt that they can not," she said.

While resale sales activity should remain low for the duration of 2019, CREB shows signs that Calgary's real estate market is starting to adjust to slower sales. That should help reduce oversupply in the market and put the industry in a more stable position by 2020, CREB said.

The benchmark price for an isolated home in Calgary declined 1.2% year on year in 2018. It hit a low of $ 481,800 in December 2018, down from $ 521,600 in October 2014.

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