Oil price slump tied to soft St. John's housing market: CMHC
A new report from Canada Mortgage and Housing Corporation (CMHC) paints a grim picture of how the global decline in oil prices since 2014 has damaged the housing market in St. John's.
"It is very uncertain, there's no doubt about it," Chris Janes, a senior market analyst with the CMHC, said in an interview Thursday, describing the current state of the housing market in the city.
The report, the first in a new series from the CMHC looking at how oil prices have affected housing in major Canadian cities, looks at the current state of housing and oil.
It also compares the market to the previous worldwide economic slump in 2008-09, which Janes said St. John's was "virtually unaffected by" thanks to booming income and employment growth in the area.
That has not been the case since the beginning of 2014, with the report stating the plunge in oil prices — and its subsequent effects on employment and consumer confidence — has clearly taken a toll in the St. John's market.
`We've made that connection between oil prices obviously having somewhat of an impact on the housing market," Janes told CBC Radio's St. John's Morning Show.
The report notes this current oil slump has caused lower prices for much longer than in 2008.
"With the uncertainty still out there, it could get a little softer as we go forward. But again, it's largely dependent on oil prices."
Housing starts, prices down
Janes noted construction activity has slowed significantly in the city.
"Housing starts have been down on average about 20 per cent the last two years, so that's fairly dramatic," he said.
- Housing starts for May decline slightly in St. John's
- St. John's housing market to cool for 2 years, CMHC predicts
The report states the average MLS price for a house in St. John's now sits just under $300,000. Janes said that's down 10 per cent on average from the peak in early 2014, and down five per cent this year alone.
"That doesn't necessarily mean your house is down 10 per cent per se, but if we look at the basket of housing — that's all houses that have sold over that time period — certainly the average would be down that much," he said, adding most buying and selling activity is in the $250,000 to $350,000 range.
Blame the budget?
The report states these declines are less than other oil-dependent cities, but "the real issue for the local housing market is expected to be the provincial government's current fiscal situation."
The report points to Budget 2016's introduction of new taxes likely to increase the number of homes on the market, and how much they sell for, although the report noted this is still just a prediction.
The report also doesn't expect the drag in demand to lessen before the end of 2017.
A buyer's market
Despite the dreary numbers and flat housing sales, Janes said there is a silver lining, with more first-time buyers now snapping up cheaper homes.
"I think a lot of them were kind of waiting to see what was going to happen with prices, because of course every year prices kept climbing. And now they've identified this as probably an opportunity, with prices having slowed down and a good time to jump in."
Janes said he gets calls daily from prospective homebuyers who are seeking advice, and he shares the same wisdom with each query.
"There's never a good or bad time to buy a house," he said. "It certainly depends on everybody's situation individually."
With files from the St. John's Morning Show