Home Month and Year August 2023 No cooling off for condos

No cooling off for condos

Multi housing segment continues to see strong buyer demand as supply struggles to keep pace


Charron Ungar has had a front-row seat to the Calgary condominium market’s rollercoaster ride over the past several decades.

Prior to becoming chief executive officer of Homes by Avi in 2018, Ungar steered the company’s multi-family division that was responsible for developments in all four quadrants of the city – from Kincora in the northwest to Lake Chaparral in the southeast.

Through the pandemic, he helmed the award-winning homebuilder through a period of hot-and-cold unpredictability.

More recently, he’s watched as red-hot buyer demand led to quick sell-outs of its first two condo towers, August and Argyle, in the popular northwest community of University District. This past spring, Homes by Avi launched its third development in the 200-acre urban community, a 162-unit six-storey mixed-use tower dubbed Autumn.

He attributes much of Homes by Avi’s success in the condo market to the attractiveness of Calgary’s overall housing market as homebuyers look for the rare trifecta of choice, affordability and return on investment.

“We have some of the strongest housing markets in the country, and that’s starting to get noticed,” he says, pointing to strong inter-provincial migration and out-of-province investor interest.

In fact, Ungar characterizes the recent condo market as one increasingly being driven by investment.

“The investor buyer is coming both locally and from outside the city – places such as Toronto and Vancouver,” he says. “They are seeing opportunities to bolster the rental housing inventory that we have in our city.”

Zonda Urban market analyst Cameron Slavik echoes Ungar in noting Calgary’s condo market has been on fire since early 2022 due, specifically, to “busloads” of Ontario investors looking for a deal.

“There were teams of them from Toronto flying out, taking buses to projects here in Calgary and, often, buying entire floors of condo buildings,” he says. “They could buy three to four units for the price of one in Toronto.”

Today, he notes many builders are continuing to market to Ontario investors through online pre-sale offers. However, he points to a Zonda Urban report released earlier this year that notes local buyers are returning to Calgary’s condo market, largely due to record levels of inter-provincial migration to Alberta.

“So, to an extent, there is some balance there,” says Slavik.

According to Canada Mortgage and Housing Corp. (CMHC), it’s been another active year for condos throughout the city. Taylor Pardy, senior specialist, market analysis with the national housing agency, notes there were 3,962 condo units under construction by early June and 1,839 condo completions, both of which were down slightly the record-setting pace set over the past couple years.

In comparison, the City of Calgary recorded receiving 9,954 building permits applications for condos during this time, down 10 per cent from the same time in 2022.

“Really, we’re seeing another relatively active year in terms of housing starts … and condo is certainly one of those segments,” says Pardy. “Ultimately, this is a function of persistent demand carrying forward from last year, even in a higher interest rate environment.”

BILD Calgary Region chief executive officer Brian Hahn is seeing similar activity among his association’s members, noting strong demand is being matched by a strong response from homebuilders and developers.

“There was a bit of a pause as we entered the new year just and consumers contemplated what interest rate increases meant. But it’s picked up since kind of end of January into February, and our members are continuing to respond to the best of their ability,” he says.

Hahn says he’s encouraged to see condo construction taking place across the city, and thereby creating continued depth in the options available to buyers.

“You can go drive around and there’s building going all over the city. I think we’re also starting to see more opportunities pop up in the established areas for redevelopment,” he says.

“For those who want to be in an established area, there’s something for them. And for those who are looking for something in a newer area, there’s opportunities for them as well.”

Both Pardy and Slavik confirm seeing strong condo construction activity throughout the city, focused primarily in the northwest and southwest quadrants, as well as hot spots in the Beltline. Slavik singles out Sage Hill and Arbour Lake West in the northwest where he’s noting increase condo activity.

Hahn, however, is cautious about using the word choice to describe Calgary’s condo market given currently low inventory levels. CMHC reports that while Calgary’s seeing a similar pace of condo completions this year compared with last, inventories levels are comparable with record lows from fall 2013.

“Certainly, supply and demand are tight, and that is a challenge we have to keep working on. But our members are geared to respond to customer demand,” says Hahn.

Meanwhile, low inventories are creating upward pressure on price. CMHC reports the benchmark condo price climbed to $306,500 in early June – a 9.4 per cent increase from $280,200 at the same time in 2022.

“Overall, we’ve continued to see interest rate hikes slow down the housing market. But in the apartment condo segment, it has generally continued to steadily climb relative to other segments,” says Pardy.

For its part, the City of Calgary is stepping in to help alleviate housing demand in the downtown through a development incentive program that includes conversion projects for residential units.

Launched as part of the City’s 10-year goal to remove six million square feet of empty downtown office space, the initiative offers grants ranging from $10 million to $15 million to building owners who might want to convert their empty office spaces.

So far, 10 projects have been officially announced that will create an estimated 2,000 new units in the core. Natalie Marchut, manager of development and strategy for the City’s downtown strategy teased two more that were soon to be announced as part of the city’s overall goal of removing six million square feet of office space from the downtown area by 2031.

“The other thing that’s really important to understand about these conversions is they’re able to be delivered much quicker than a new build,” she says, estimating construction timeframes of some conversion could take less than 16 months.

“The speed of delivery that we can achieve with conversions is a really critical piece in the housing supply issue.”

Slavik experts it will take a while before supply in Calgary’s condo market catches up with demand. For example, many of pre-sale condo launches being marketed today won’t close until as early as 2026 or 2027.

“There might be a bit of a lag because of the number of these later closing dates,” he says. “At the same time, I still see quite a few being built currently that will be launching in the meantime.”

Pardy notes that while condo construction levels have levelled off slightly since 2022, he expects this will rebound given the strength of demand that we’re seeing in the market.

“We see the multi-family unit segments of the market, including the apartment condos, doing fairly well over the next few years,” he says.