According to the Canadian Real Estate Association, the oil price slump affected consumer demand in oil-dependent parts of Canada, including Calgary and Edmonton, where the sales declines were most evident. Overall, sales decreased 5.8 percent month-over-month in December, with seasonality taken into account. Actual sales without seasonal adjustment, however, ticked up by 7.9 percent year-over-year. CREA’s home price index was also up, appreciating by 5.4 percent over December 2013’s figures.
“Given the uncertain outlook for oil prices, it’s no surprise consumer confidence in Alberta softened and moved some home buyers to the sidelines,” said CREA chief economist Gregory Klump. “With regards to slower activity in Calgary and Edmonton, sales in these two markets had been running strong all year before they returned to levels that are entirely average for the month of December.”
Oil prices have had an interesting relationship with real estate statistics in North America; in the United States, the precipitous drop in oil prices is considered one of the variables that have helped fuel a steady decline in mortgage interest rates.
In terms of individual markets, home sales in Calgary were down 24.6 percent compared to November’s data. In Edmonton, the drop was even more pronounced at 26.4 percent month-over-month. Other markets that reported a big drop in home sales were Regina (down 12.3 percent) and Saskatoon (12.2 percent). Greater Toronto, which had been one of the more active housing markets, also experienced a decline of about 5 percent on CREA’s report for December.
According to TD Economics analyst Diana Petramala, the decline in oil prices is “likely to trigger a housing downturn in commodity driven markets” such as Calgary and Edmonton, which were hitherto expected to perform strongly.
Home prices were up year-over-year in Calgary by a solid 8.8 percent. The Greater Toronto Area experienced a 7.9 percent annual increase, while price increases in Vancouver were also decent at 5.8 percent year-over-year. Prices, however, declined in Regina, where they slipped by 3.5 percent from the previous year.
The Canadian housing market has been bullish for over five years already, but market analysts had previously cautioned against a softening in sales and home building metrics to take place as interest rates move up in 2015. Some experts had even warned against a similar housing bubble to the one experienced by the U.S. in 2008, but majority have predicted the proverbial “soft landing,” or a slow and steady decline after bullish performance since the late 2000s.
In other relevant statistics from CREA, Canada’s sales-to-new listings ration in December was 51.8 percent, which was substantially lower than the 55 percent range this metric was in from August to November. As of last month, inventory was at 6.2 months, up from the previous month’s 5.8 months’ worth of available homes. With those stats in mind, CREA believes that the Canadian housing market has developed more equilibrium between supply and demand.