Real estate, in any market, is a business that can go up just as quickly as it can come down. The Calgary market is trying to make its way back up, but the current economy continues to support the “it’s a buyer’s market” mentality. So what can buyers expect when searching for a home in the million-dollars-and-up range and how has the recession affected the luxury real estate market?
Sam Corea, a well-known Calgary real estate agent, says, “There are a lot of moving pieces to the Calgary real estate market. Since the spike in the market that occurred in 2014, not only has oil hit bottom, but we’ve also had changes to the lending rules which have affected how people qualify for a mortgage as well as how much down payment is required.”
And because many people have lost their jobs due to the economic downturn, this has resulted in much uncertainty in the real estate market. “Prices have had to be adjusted to reflect this uncertainty,” confirms Corea. “People have lost their jobs or are worried about losing their jobs, and a lot of people have had to leave Calgary to find work, and as a result, the luxury market has taken a hit.” But there are still buyers out there who are taking advantage of the price drop and now have an opportunity to get into the luxury market.
CREB’s chief economist Ann-Marie Lurie says homes sold for over a million dollars currently represent around three per cent of the overall sales activity in the resale market.
Prior to the recession, Lurie says, “Sales activity in the higher-price ranges were improving and reached new sales highs of 847 in 2014. However, as the recession impacted many of the higher-paid professions, this sector of the market was one of the first to feel the impact.” She goes on to say the demand eased while supply levels remained elevated, likely causing steeper price declines for these upper-end homes. “This was somewhat evidenced by the double-digit price adjustments that occurred in some of our most expensive neighbourhoods compared to the modest declines in the more lower-priced communities.”
With prices starting to adjust, Lurie says this has encouraged some improvement in 2016 sales activity when compared to 2015. “And while sales activity has improved and supply levels have eased pushing the market towards more balanced territory, evidence of excess supply continues to impact this segment of the market.”
Mark Kwasnicki, owner and founder of luxury homebuilder McKinley Masters, says there have definitely been challenges in the last year but he is confident things are finally looking up. In terms of changes with regards to new builds, particularly in the luxury market in today’s economy, Kwasnicki says, “The luxury market caters to a higher standard of quality so there haven’t been any changes in what customers are wanting in their luxury home, despite the economy.”
And the same goes for luxury condominium projects such as The Concord in Eau Claire. The project is being developed by Vancouver-based Concord Pacific Developments. Their vice-president, sales, Grant Murray, says, “What affects single family does not affect condominiums the same way. What affects resale doesn’t affect pre-sale – it’s a different ball game altogether. The indications of that would be closing over $2 billion in sales in Toronto, Vancouver and Calgary combined, mostly in Vancouver and Toronto. And all of those sales are pre-sale as we don’t engage the market in the resale market, and we don’t engage the market in single-family homes.”
Murray explains the other product that has been successful was their estate penthouses that ran from $3.5 million to $7 million, with the top penthouse being worth $13 million. “We have sold five out of six of the estate penthouses. Who did we sell these to? We sold them to people with businesses that have been successful and who have big homes. But now they want neither the big house nor the upkeep that comes with it.”
In the last two years, The Concord has been averaging a sale a month each and every month. “We keep marketing and selling to people in the demographic that aren’t affected by the downturn but still want to make that lifestyle change,” says Murray.
And although his company deals in the Vancouver, Toronto and Calgary markets, Murray says you just cannot compare them. For example, there was a huge price swing in the last year in Vancouver and Toronto pre-sale prices. “Our luxury sale price on a cost-per-square-foot basis in downtown Vancouver has gone from $1,000/square foot to $2,000/square foot.”
Kwasnicki agrees and says, “The Calgary market for luxury homes can provide a much higher-quality product for the price point than these other markets can provide. Calgary has tremendous value in the luxury market.”
There is also amazing value in the Calgary luxury resale market. What you can buy in Calgary for a million dollars won’t buy you the same product in the Vancouver or Toronto markets. “There is just no comparison,” says Corea.