Market trends and expert predictions continue to call for a buyer’s advantage in Calgary’s condominium market.
On the resale side, high inventories and lower prices are clearly working in the buyer’s favour. According to Ann-Marie Lurie, chief economist to the Calgary Real Estate Board (CREB), “We are looking at price adjustments of over 17 per cent from 2014 highs. The apartment condominium side has been one of the hardest hit sectors in the resale market. The challenge for resale will continue to be the competition with the new.
“We’ve seen a lot of struggles in the resale side of the apartment condominium segment and that is in part due to too much supply,” Lurie explains. “This has been the case for the better part of five years, and it has impacted prices.” Year-to-date the average sale price slid 5.73 per cent from $292,558 to $275,783.
The influx of new product is expected to continue according to Taylor Pardy, senior economic analyst for Canada Mortgage and Housing Corporation (CMHC). “In terms of our housing starts forecast, we are anticipating multi-family including condo to be a significant portion of housing starts over the next few years,” he says, noting that the new and resale markets are showing differing trends. “Overall in terms of the condo market, things are looking more robust, certainly on the new home side of things.”
These predictions are supported by CMHC’s Housing Market Outlook published in the fall of 2019. According to the outlook, “Multi-unit segment is also expected to see increases in new construction in order to support demand for lower-priced housing options in favourable locations, particularly as available rental options begin to become less abundant.”
The multi-family segment offers the most affordable options for those looking to enter home ownership. “It may become even more affordable,” Lurie says. “With these price adjustments, some people may see it as an ability to get into home ownership, particularly the first-time buyers. We have product under $200,000 and that didn’t exist a short while ago.”
In the resale market, conditions vary depending on price range, with increased activity happening in specific segments. Pardy notes an interesting trend: “In 2019, units priced up to $350,000 represented about 72 per cent of sales.” Most sales have occurred in this “more affordable” segment. This is slightly down from 2018 when the price range below $350,000 represented about 78 per cent of the market.
Vivienne Huisman, a Calgary real estate professional with Sotheby’s International Realty Canada, has seen a steady stream of investors from out of province who are looking to take advantage of low prices and the growing demand for rentals. The inner-city condo market is attracting those who are confident that conditions are set to improve and the Calgary market is a worthwhile investment. The rental market has become more competitive due to increased net migration, as newcomers tend to rent rather than buy.
“The condo market has been saturated for a really long time, with condos sitting on the market,” Huisman explains. “We’ve started to notice, with net-migration numbers and the demand for rental housing increasing, there’s an opportunity now for investors to snap up condos in ideal locations (key), at a lower price point, to rent them out and make a profit, [and] perhaps flip it in five to 10 years when the market improves.”
Huisman receives inquiries from Vancouver investors on a daily basis. “They see an opportunity,” she says. “People truly believe that this market has bottomed out and now is the time to take advantage.” She also notes the majority of condo activity is occurring within the $240,000 to $350,000 range. “Within that price point there are some really great opportunities.”
Most often investors are looking to stay below $350,000, Huisman explains, otherwise the formula for rental investment doesn’t work. “Renters don’t pay based on square footage, they pay based on one or two bedrooms. So, I always encourage investors to buy the smallest square footage in the best buildings. They get this for a great price and can rent it out for top dollar.” Current rents she sees for a one-bedroom inner-city apartment are between $1,800 to $2,200 per month.
With the seller in mind and hopefully absorption of inventory, a more balanced market will become evident in 2020. Pardy points out, “If you look at the inventory of homes on the market (all types), apartment condos – particularly in the past four to five months – we’ve seen inventories dropping quite significantly. Inventory has dropped about 30 per cent overall compared to the same period of time last year.”
Lurie concludes on a positive note, “Prices flattened out (versus declined) in the northeast and southeast districts and have remained flat compared to last year (but still well below what they were before). It’s far from recovery, but we are starting to see some signs of stability.”
If the condo market is any indication, confidence in the Calgary economy is growing.