Although there is mild economic improvement in Calgary, there still remains a delay in real estate recovery as higher lending rates and weak migration continue to affect housing demand.
Resale gains were seen in most of the city’s districts with the largest increases in new community developments. Most units were detached inventory priced between $300,000 and $500,000. Overall, prices for the detached segment remain relatively stable.
“It looks like economic conditions are improving. We saw a bit of an increase in the market during the first portion of the year. As of June (2017), the sales were up by 12 per cent from the previous year, and what we are seeing in the second half of the year is that sales are improving, but not at that same rate,” explains Ann-Marie Lurie, chief economist at the Calgary Real Estate Board (CREB).
Sales growth eased during the second portion of the year as expected. This slower activity during the latter part of the year is usually typical for the winter months – though the economy is still feeling the affects of the past two years of recession.
“We are now traditionally moving into the slower time in the housing market compared to the springtime,” says Calgary Realtor Bryan Shettler with Re/Max Landan, “although the combination of (low) net migration, changes in lending rules and increase in interest rates has an impact.”
Calgary is still in economic recovery as low oil prices and employment rates continue to be key factors influencing the market.
Lurie says, “On the whole, we are generally seeing improved demand in detached homes this year. Now, at the same time listings have also been rising, so we are seeing more product come onto the market and that has been influencing inventory.”
The good news is that pricing is steadying in the detached segment even though there is a slight increase in product.
“Prices are generally stable in the detached market as demand has generally improved, but there still is some inventory in the market that has to be worked through. Now on the whole, prices since October (2017) are just slightly above from last year, but very similar. So, really we are three per cent below highs that we saw in 2014,” explains Lurie.
For the most part, all districts (except the northeast) have seen a slight improvement in price stability. Still, there is a long way to go before reaching a full recovery.
“The only sector that has been somewhat different is the west end. This is the only sector where we have really seen prices move similar to what they were in 2014. It was probably the strongest (price) growth out of all the other sectors at 4.4 per cent,” adds Lurie.
Much of the influence on the west district’s pricing is attributed to low levels of supply due to less competition between detached resales and new builds compared to other communities in the city.
“Some of the areas that haven’t seen as strong of a price recovery have really been in the areas where there is competition from new developments. So, the north, northeast and south districts have seen detached resales competing with all brand-new homes which is influencing the pace of recovery,” states Lurie.
Housing prices are influenced by the amount of product on the market. Hence, higher inventory levels have weakened the overall pricing of detached resale listings in those areas that have more new builds.
Yet, increased sales growth for new detached homes has occurred in some of the culturally-diverse areas of the city.
“Calgary’s new north and northeast, as well as deep southeast have seen the most growth in sales for net new single-detached homes. Favourite communities for new homebuyers include locations such as Livingston, Cornerstone and Mahogany,” says Michael Klassen, sales manager for Calgary single-family north at Jayman BUILT.
Some of the demand for new homes might be due to the demographic and purchasing trends influencing buyers.
Klassen proclaims what is driving the trend is the desire for communal living among multiple families and family members. “Many culturally-rich families prefer to buy more than one house on the same street or are looking for diverse layouts with a high bedroom count that older homes don’t have.”
Therefore, a number of homebuyers are looking for communities that offer better affordability and diversity.
“One thing about Calgary is that we are very fortunate to have a lot of product availability in the lower-price ranges. Whether this matches what people want will be a different story, but we do see a lot of supply in the lower ranges,” explains Lurie.
Meanwhile, the city centre experienced a slim recovery in sales and pricing compared to one year ago.
“For the most part, we have seen sales in the city centre year-to-date as of October (2017) increase by 15 per cent – this is an improvement from the previous year. Also, some of the pricing we have seen in the city centre is about 2.3 per cent over last year (2016) on a year-to-date average basis for the benchmark price, but this is still about 4.4 per cent below highs,” says Lurie.
Although there remains uncertainty about how demand and supply in the housing market will be affected in 2018, there are hopes for a positive transition in the market as employment and economic gains continue in Calgary.