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Alberta home prices will decline by a cumulative 6.5 per cent between 2015 and 2017 while pulling back the province’s economy, says TD Economics.

“This is roughly three times the decline expected for the nation as a whole. The impacts on spending are just beginning to be felt, due to the lagged impacts of the wealth effect,” the bank said.

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“Even after price declines run their course in the oil-producing provinces, the impact on spending could linger for one to two more years. The impact appears surmountable, but nevertheless is a factor that could ultimately mute some of the province’s momentum as it moves back into a growth stage.

The TD report said the claw back in home prices is small relative to gains over the past decade, “shielding the majority of homeowners from more material negative wealth impacts.”

TD Economics defines housing wealth as the market value of all homes and residential land. It grows both with prices, and with construction. In the past 15 years, Alberta has led all provinces with 376 per cent growth followed by Saskatchewan (305 per cent), Manitoba (277 per cent) ad British Columbia (252 per cent).

It said the impact of housing on the Canadian economy goes beyond bricks and mortar. Direct impact comes in construction output and employment while indirect input comes from consumer consumption related to growing wealth.

“The pause in the pace of wealth growth is expected to be quite small, particularly when compared with the increases seen in recent years. Indeed, the pause is expected to come at the same time as exports and other non-housing-related sectors of the economy become more significant drivers of growth.”

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