Real estate professionals are somewhat optimistic about Calgary’s condo market, but they are also cautiously realistic about expectations and trends.
Like most sectors of real estate, employment and migration are vital factors impacting Calgary condo market trends.
The stats show that stereotypically downsizing baby boomers have a significant impact on the buying and selling of condos but, due primarily to Calgary’s median age being 36, millennials and gen-Xers drive the local condo market. The unfortunate business aspect is that although they are key factors when it comes to traditionally triggering migration to Calgary, millennials and gen-Xers are also the demographics that are most impacted and are most often casualties of job losses and cutbacks.
“Employment and migration are absolutely the key aspects of condo supply and demand,” explains Ann-Marie Lurie, chief economist of the Calgary Real Estate Board (CREB). “When migration levels and employment rates fall, as they have for the past two years in the Calgary market, it causes a weak demand environment.”
As with other sectors of real estate, Calgary condo trends are impacted by inventory, price and demand. “[It] still continues very much a buyer’s condo market,” says Jim Sparrow, Realtor at Royal LePage Calgary. “And it has been a Calgary condo buyer’s market trend since 2014.”
According to Canada Mortgage and Housing Corporation (CMHC) – Canada’s national housing agency – housing starts for the Calgary market were down for 2016. CMHC’s Richard Ho, principal, market analysis (Calgary), notes the biggest culprit of the slump was a drop in the pace of condo and apartment construction. “Demand for all new homes – especially condos – has dropped as Calgary’s economy continues to be battered with job losses, the job market, income worries and low population growth, while the supply, especially of condos, remains high.”
“For the last three months of 2016, sales of condos and apartments have been down by as much as 40 per cent for the same three-month period in 2014,” Sparrow points out. “Active listings or inventory is 22 per cent higher than it was at the end of 2014.”
Although it is much more complex, and while Realtors use the industry jargon of “absorption,” the real estate sector and specifically the condo market is consistently a business of supply and demand.
CMHC is forecasting overall new housing starts in 2017 to remain at 2016 levels (in the range of 8,400 to 9,400 units) mainly due to a large inventory of multi-family units on the market.
When it comes to the popular real estate strategy of forecasting and tracking price points, Sparrow cautions it’s vague and confusing to try to guesstimate or track average condo square foot prices and median condo square foot prices, especially in such a fluctuating market.
According to the stats, for the last three months of 2016, particularly compared to 2014 prices when a boom was happening, Sparrow says “both average and median condo sale prices are down by double-digit percentages. The average 2016 condo price was down at least 10 per cent from 2014. And the median condo price was down about 12 per cent.”
CREB’s Lurie notes the estimated 2016 price for a typical Calgary condo was $277,945, down by about seven per cent from the end of 2015, and rental vacancy rates are at an all-time high.
CREB and many Calgary-area real estate agents mention sales of high-end properties have picked up. CREB stats show there were more than 430 Calgary homes above $1 million sold last year, which is up from about 390 the year before. It included the sale of two condos for more than $5 million in The River, a luxury downtown development.
Sparrow explains while the numbers may be positive in terms of sales, it may not be such a positive reflection of prices. “In all market segments, owners of properties over $1 million are selling for far higher percentage concessions than are those with $300,000-$400,000 units.”
Last year, some Calgary analysts were speculating Vancouver’s foreign buyer tax, combined with Toronto’s notorious overpriced condo market, could be a rebound boost for the price of Calgary condos. Most Calgary Realtors agree that boost didn’t happen. In the Toronto and Vancouver markets, home prices increased by about 30 and 15 per cent respectively, although, last year, the Bank of Canada issued a warning those housing prices are unsustainable given national economic situations.
“When it comes to condos and most Calgary real estate, neither the average or median prices are really meaningful metrics. ‘Benchmark’ is a better measure but the numbers still leave a lot to be desired. It’s all about price point and area of the city. Demand and prices vary dramatically depending on where you are,” explains Sparrow.
Of course some valid real estate clichés, like location and price, are still key factors, but he emphasizes that, when it comes to Calgary condos, demand is king. “Oil at $100ppb drew a lot of people into the city, many of whom lived and worked downtown. In 2016, companies continued to lay people off, even with $50 oil. Investors have still not been drawn to the apartment market as they suffer from the same trepidation local buyers do about prices continuing to fall into 2017.”
“We have seen prices adjust and start to get closer to the current economic environment,” Ho says. “We do expect to see the market gradually shift from a buyer’s market to more of a balanced market in 2017.”
The encouraging positivity is echoed by the Ottawa-based Canadian Real Estate Association (CREA) which has crunched numbers to forecast that this year, overall real estate sales will rebound in Alberta and Saskatchewan as oil prices inch up and the provincial economies improve.
CREA also cautions about minimal price growths for 2017. The association calculates the Vancouver market will likely experience a decline in sales and prices this year, and the Toronto market will have a modest price growth of less than two per cent, mostly because inventory has fallen to all-time lows. Both markets are running out of homes to sell in the $3 million and up price range.
Many Calgary-area real agents and analysts are also voicing cautious optimism that, as stability happens in the oil market and the employment picture turns around, there will be noticeable strengthening in Calgary’s condo and overall housing market.