After a challenging two years struggling through a vicious economic downturn, Calgary’s housing market appears to have turned around and is now poised for growth the rest of 2017.
Whether resale homes, new homes or the rental market, indicators point in a positive direction, suggesting the real estate market has plowed through the economic storm and can see the light at the end of the tunnel.
Quite simply, demand is returning to the market.
“The economy in Calgary has been getting stronger. We are seeing growth in employment. Income growth has also been positive. And we’re also seeing some growth in population especially in the young adult age group. That’s important in supporting housing demand,” says Richard Cho, principal market analyst in Calgary for Canada Mortgage and Housing Corp.
“We’re seeing just more confidence in the market. Consumer sentiment has also improved which helps with people getting off the fence and going ahead with their buying decision.”
For the real estate industry, a consumer’s perception of what could happen or what may happen in the future is very important. It has a huge impact on buying decisions. That perception is often formed through what the consumer is digesting each day in the media. But this year the news on the economic front has been positive pointing to stability in the economy, the price of oil, as well as employment, income and population growth.
“We feel the bottom was reached some time in 2016 and so 2017, we expect, will be a year where the market continues to recover. Markets for most of last year were in a buyer’s market but we are starting to see that changing in 2017,” explains Cho.
Like sports, real estate is really all about the numbers. Statistics will clearly tell you what’s happening. The turnaround could be seen early this year with rebounding from the uncertainty and trepidation of the past two years.
In the first quarter, MLS sales of 4,192 were up 20.29 per cent from the same period last year. The benchmark price ($438,300) dropped by 2.06 per cent but the median price ($430,000) rose by 2.38 per cent and the average price ($482,065) increased by 3.05 per cent.
Also, in the first quarter, single-detached housing starts in the Calgary region were recorded at 800, up from 600 for the same period a year ago. The multi-family sector rose from 907 last year to 1,279 this year.
A key indicator of the city’s current economic condition is the downtown office market. Whether the economy is hot or cold, the number of people filling downtown office space will clearly show the trend. The past two years has seen a horrific plunge in the state of the commercial real estate sector downtown with soaring vacancy rates.
Those rates are at historic low levels, offering a glimpse of the number of people who have lost their livelihood, particularly in the oilpatch, due to the collapse of oil prices. Less people working, especially in the well-paying oil and gas industry, means less demand for homes.
But the tide is shifting. A report by Avison Young shows the downtown office vacancy rate of 23.9 per cent in the first quarter was steady and unchanged from the last quarter of 2016. It represented positive news as the market took its first steps in halting its overall downward trend. Downtown absorption – the net change in occupied office space – for the first quarter was positive at 3,000 square feet. This figure represents the first positive quarterly absorption since the downturn began in 2014.
That is indeed good news for the local residential real estate market.
The housing market transition appears to be consistent with trends in the labour market, says Ann-Marie Lurie, chief economist with the Calgary Real Estate Board.
Stability in the labour market is important and there are good signs of that this year. Although the city has not replaced all the jobs lost in the past two years, and there are still a lot of people out of work, the overall trend is positive and can help build confidence in real estate.
“We’re moving in the right direction; all the indicators are there,” says Lurie.
The changing economic environment is lifting the cloud of uncertainty for potential homebuyers.
Guy Huntingford, chief executive officer of BILD Calgary Region, which represents developers and homebuilders, says the real estate market depends on three things – price point, where homes are being built and the type of product.
“There’s definitely still a healthy, robust group of people looking for homes,” says Huntingford. Although in-migration to the city has slowed, flocks of people had relocated prior to the economic downturn.
“All those people came here, they settled and now they’re in the market to look for homes because people don’t necessarily buy right away…. The industry for the most part is very positive.”