Calgary’s previous housing boom (made possible by five years of rising oil prices) is now facing a bust due to falling oil prices.
Non-government mortgage insurer Genworth MI Canada Inc. is preparing for more losses this year and in 2016, while non-bank mortgage lender Home Capital Group Inc. is tightening standards in Alberta to cut risks from plunging house prices.
“The warning signs are out,” said Gerald Soloway, chief executive of Home Capital. “It’s only prudent for everybody who participates in that market to heighten their alertness.”
The last decade saw million-dollar trophy homes in Calgary doubling in prices. However, the plunges in oil values forced energy firms in Alberta to cancel projects and fire workers, prompting the most depressing house sales on record in December and January.
More price declines are expected to follow.
Soloway added that the company has begun to factor in a 10% drop in house prices across Alberta when making loans.
Alberta “has gone from the top spot in the economic growth rankings to second from last on the provincial leader board,” said Derek Burleton, deputy chief economist at Toronto-Dominion Bank, in a note to clients.
And since 2008, “a significant softening in job markets will set the stage for a second major housing correction in Calgary and Edmonton,” he said.
Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate
More market watch: