Close X
Friday, November 1, 2024
ADVT 
National

Alberta's Housing Sector Is Hurting, But It's No 1980s Flashback: Feds

Darpan News Desk The Canadian Press, 03 May, 2015 01:15 AM
    OTTAWA — The oil slump is sure to bruise Alberta's housing market, but don't expect real estate in the province to absorb another 1980s-style drubbing, says an internal federal government analysis.
     
    The Department of Finance compared the potential real-estate fallout in Alberta — a result of the late-2014 collapse in oil prices — with the pain inflicted on the provincial market during the deep recession of the early 1980s.
     
    The document was released to The Canadian Press under the Access to Information Act at a time when economic concerns are top of mind for Albertans as they prepare to head to the polls for Tuesday's provincial election.
     
    It underlines how the two downturns shared several similarities in Alberta: rising economic uncertainty, a cooling housing market and a drop in crude prices that followed an extended period of exceptional growth.
     
    At the time the document was produced in late January, the federal government was expecting any real-estate decline this time around to be shorter and have less bite in the province. 
     
    The analysis said the "particularly severe impact" sustained by Alberta in the 80s was amplified by an even weaker world economy and higher inflation that fuelled big interest-rate hikes.
     
    Alberta's housing market has seen sales activity slow and prices drop of late. The overall Canadian market has also been experiencing volatility, with prices continuing to climb in cities like Toronto and Vancouver amid a prolonged stretch of low interest rates.
     
    Some experts have warned Canada could be facing price corrections or even a housing bubble.
     
    The Bank of Canada has sought to ease the fears, predicting the market is instead headed for a "soft landing," even though it identified it as a key financial stability risk and estimated the country's housing prices could be overvalued by as much as 30 per cent.
     
    When it comes to Alberta, however, March sales activity — compared to 12 months earlier — slipped by about 30 per cent in Calgary and by nearly six per cent in Edmonton, according to the Canadian Real Estate Association.
     
    From March 2014 to March 2015, the association also found sales prices dipped by 2.2 per cent in Calgary, though they had increased by 4.4 per cent in Edmonton.
     
    In the 1980s, the federal document said house prices in Calgary fell by 31 per cent and by 26 per cent in Edmonton between 1981 and 1985. The declines followed a surge in real-estate activity driven by higher energy prices, it said.
     
    The document, prepared for deputy finance minister Paul Rochon, also blamed Alberta's housing slide in the 1980s on aggravating factors that are no longer present.
     
    The examples include the existence — and eventual failure — of small banks ill-prepared for the boom-time risks. It also highlighted the 1980 introduction of the controversial national energy program, which among other things, shocked the economy by setting oil at a "made-in-Canada price."
     
    The memo pointed to the continued presence in Alberta of "non-recourse" mortgage policies, which it said could make the market more vulnerable "to a more-pronounced cycle of housing-price declines."
     
    Non-recourse mortgages, which often allow homeowners to walk away from their foreclosed homes as well as the outstanding debt, contributed to a spike in the default rate in the 1980s and drove prices down, the document says.
     
    Ottawa doesn't expect a rush of defaults in Alberta unless it's hit by a "major increase" in job losses, the document said. Prime Minister Stephen Harper recently said that debt-servicing costs in Canada had fallen and default rates remained extremely low.
     
    But the more favourable situation in Alberta this time around would only partially offset the drawbacks of lower crude prices, the government document predicted.
     
    "A housing market that over the last decade has been driven in part by higher oil prices cannot remain completely insulated from significant oil-price declines," said the memo.

    MORE National ARTICLES

    Const. Sheldon Shah Testifies He Was Shot Several Times Trying To Protect Another Officer

    Const. Sheldon Shah Testifies He Was Shot Several Times Trying To Protect Another Officer
    WETASKIWIN, Alta. — An RCMP officer was trying to arrest a man in the living room of an Alberta farm house when the Mountie saw the muzzle of a gun pointing out of a doorway.

    Const. Sheldon Shah Testifies He Was Shot Several Times Trying To Protect Another Officer

    Bank Of China Awarded More Than $672 Million In B.C. Supreme Court Case

    Bank Of China Awarded More Than $672 Million In B.C. Supreme Court Case
    VANCOUVER — A B.C. Supreme Court judge has ordered two defendants to pay the Bank of China more than $672 million in an international breach of trust and fraud case. 

    Bank Of China Awarded More Than $672 Million In B.C. Supreme Court Case

    Advocates Hope Murder-Suicide Inquest Will Help Families With Autistic Children

    Advocates Hope Murder-Suicide Inquest Will Help Families With Autistic Children
    PRINCE RUPERT, B.C. — The family of a British Columbia mother who killed herself and her severely autistic son is hopeful that an inquest will bring something positive out of the tragedy, says an advocate.

    Advocates Hope Murder-Suicide Inquest Will Help Families With Autistic Children

    Four Members Of Royal Navy Face Sexual Assault Charges In Halifax

    Four Members Of Royal Navy Face Sexual Assault Charges In Halifax
    HALIFAX — Four members of the Royal Navy have been charged with sexual assault causing bodily harm at a Canadian Forces base in Halifax.

    Four Members Of Royal Navy Face Sexual Assault Charges In Halifax

    Canada's Greenhouse Gas Emissions Continue Slow Climb: Report

    Canada's Greenhouse Gas Emissions Continue Slow Climb: Report
    OTTAWA — The latest emissions inventory from Environment Canada shows the country's overall greenhouse gas output climbed 1.5 per cent between 2012 and 2013, continuing a slow, but steady, upward trend since the global recession of 2009.

    Canada's Greenhouse Gas Emissions Continue Slow Climb: Report

    Federal Budget To Address Security, Anti-terrorism Programs, Sources Say

    Federal Budget To Address Security, Anti-terrorism Programs, Sources Say
    OTTAWA — The Conservative government plans to use the coming federal budget to underscore its pre-election messaging on the importance of national security.

    Federal Budget To Address Security, Anti-terrorism Programs, Sources Say