Allowing for fluctuating regional real estate factors like the economy and consumer trends, the Calgary condo market is gaining momentum despite some speed bumps in 2018.
Thanks to urban sprawl and unaffordability, condos are rising in suburban areas, close to transit hubs, shopping and services – making them a great alternative to traditional single-family homes.
According to Statistics Canada, between 2011 and 2016, the growth rate of Canadian households living in condominiums was up 16.6 per cent in census metropolitan areas (CMAs). Smaller cities and towns (non-CMAs) were not far behind, with the growth rate increasing by 11.9 per cent.
“When it comes to the condo market, there are many variables and factors to consider,” explains Ann-Marie Lurie, CREB chief economist. “There has been a reduction in demand due to the combination effect of new mortgage rules and stringent lending conditions, Calgary’s unemployment rates in traditional sectors and increasing competition in the Calgary rental market, although rental rates are rising, which is a positive for the condo market.
“There is a Calgary pattern of activity,” she says. “Resale and detached homes, at 61 per cent, are still a majority of Calgary sales. Apartment/condos are usually in the 17 per cent range but this past year it has been lower, in the 15 per cent range.”
She cites there is little value in hindsight but CREB numbers demonstrate there was a lot of condo product under construction in the past four years. Calgary’s peak condo sales were 4,805 units in 2014. By the end of last year, sales were 2,316, well below long-term averages. “Although there were drops in sales in all types of markets, the condo sector has been particularly challenged over the past three years.”
The condo benchmark price at the end of 2014 was $290,000. By the end of 2018, the benchmark price has dropped to $257,000. According to a recent CREB report, year-to-date apartment/condo sales are nearly seven per cent below last year and, despite the easing inventories, the months of supply remains elevated at seven months.
Year-to-date apartment/condo prices have eased by 2.8 per cent and remain 14 per cent below 2014 highs. Declines occurred across all districts, with the steepest drops in the northeast, east and south districts.
Like the fine layers of an onion, despite downturn and recovery trending, it is often a challenge to extrapolate the condo-specific stats and factors from the bigger Calgary real estate picture.
The focus of Calgary condo developers and new-home builders is similar but drastically different. Their market strategy and planning varies dramatically although they share crucial attention to aspects like the uniqueness of the Calgary market, the economy, consumer confidence, demographics, affordability, last year’s mortgage stress test, the fluctuating resale market balance, Calgary’s labour market and existing inventory.
The Calgary condo market finished 2018 with a sluggish look back but, thanks to some encouraging and positive factors, it is starting 2019 with positive look-ahead momentum.
Two of Calgary’s most popular and successful condo projects are University District, the 184-acre residential and commercial development on lands owned by the University of Calgary; and the Concord, Calgary’s newest luxury highrise and, as some say, the most grandiose condo development – at $350 million – the city has yet seen.
“There’s still a lot of market uncertainty given rising interest rates and new lending rules,” points out Maureen Henderson, director of marketing and communications with West Campus Development Trust, developers of University District. “These variables mean that there are less qualified buyers in the market with a readiness to purchase, more competition and price sensitivity as people wait longer to save a down payment or wait for better incentives.”
Grant Murray, senior vice president of sales with Concord Pacific Developments – developers of the Concord and its breathtaking and luxurious features and amenities – admits that although the Concord targets a unique niche market, sales have been steady but not immune from recent Calgary speed bumps.
“Of course, the downturn impacted the high-end as well as the standard condo market. Most were begun when oil was $104, then down to $27 and now about $65. It wasn’t quite a sky-is-falling disaster but combined with interest rates, new rules and qualifications for new buyers, some developers pulled in the reins.
“But while nobody is sure of specific reasons,” he adds, “there is a good feeling of optimism. There is growing diversity in Calgary and no speculation tax that is discouraging foreign buyers in markets like Toronto and Vancouver. For investors in Calgary, it’s only the five per cent GST.
“Among the three cities we build in – Vancouver, Calgary and Toronto – when it comes to perception of value, affordability and desirability, Calgary is the place to live.”
Henderson shares the Calgary positivity. “Buyers are increasingly looking for value. At University District the value proposition goes beyond the price tag for a condo or its finishes. People understand that community and building features, access to transit, open spaces, all add up to a better quality of life and they’re factoring these into the buying equation.
“Many of our buyers are downsizers, people who are living in single-family homes and want the convenience and amenities available in a condominium without sacrificing square footage.”