Back in March, Calgary’s real estate market was hot. It was without a doubt a sellers’ market and interest rates were at an all-time historical low. CREB® chief economist Ann-Marie Lurie says, “We started to see tighter conditions as COVID-19 hit, but then the market really shifted. There was too much supply in the market pre-pandemic and the demand was not as strong. When COVID-19 hit, rates came down and we really saw a shift in the market at that stage. The demand started to improve.”
Fast forward seven months later, and things are looking a little different. After seeing a market that experienced gains across all property types hitting all-time record highs, Calgary’s post-pandemic real estate market is shifting, once again. It is moving towards a more balanced market and reports suggest that Alberta will come out on top during the current market correction. And thanks to its large oil and gas economic footprint, industry experts predict that Alberta should see less of a decline compared to other provinces.
Dennis Plintz, broker/owner of Plintz Real Estate says, “In July, year-over-year sales prices went down five per cent in Canada, but in Calgary, we were still up 12 per cent. Reports suggest there may be a 20 to 25 per cent decrease in real estate prices for Canada and that sales volume may drop by 22 per cent. The cities that were leading the growth in price and in volume will feel the slowdown the most. Alberta should hold its own with resale prices without great declines as we are still undersupplied and the cost to build is higher than resale prices.”
He adds, “There has been a shift in the market in the third quarter of 2022. It has shifted from a very strong sellers’ market to a more balanced market. But it is still in favour of sellers with less than two and half months of supply and selection for buyers. A balanced market has approximately five to six months of supply, so we still have a long way to go.”
And although there has been a drop in competing bids at all price levels, Plintz says he has not seen prices coming down dramatically. “In fact, specific sectors and sales volumes have continued to increase considerably in the second half of the year. Condo sales and row houses are up 50 to 65 per cent from 2021 sales levels. This means condo and townhouse owners are doing better and their investments are in good shape. And it’s about time.”
Another major factor that has affected the real estate market is the Bank of Canada’s aggressive stance to address inflation through interest rate hikes. Four consecutive rate increases have pushed mortgage rates to the highest levels in over a decade.
And while interest rates have increased over the last several months, Mortgage Tree broker owner Kent Chapman says, “They are low comparatively over the last 30 years. All-time historical lows have been in the market since March 2020 for both fixed and variable interest rates. Recently we have seen both variable and fixed rates rise above pre-COVID-19 levels and are expected to continue into the new year. The main reason for the increase in rates is the World Central Banks wanting to lower inflationary pressures in their respective economies.”
Lurie adds, “As rates continue to rise, it will impact what people can afford and what their monthly payments will look like. What it also tends to do is impact demand.” Lurie shares that CREB®’s Q2 2022 Quarterly Update Report revealed that lending rate increases have started to impact home sales and are expected to weigh on sales over the second half of the year, offsetting some of the strong gains reported over the first half of the year.
Chapman echoes Lurie’s comments and says that current rates are rising above the fixed-side to pre-COVID-19 levels. “These rates are affected by Canadian bond rates, primarily the five-year bond rate. We have been given various indicators from the government, Bank of Canada and economists that we should expect rates to rise. Clients who have locked in their rates will enjoy the lower payments during the term and those who are in variable rates will see an increase in their payments to maintain their current amortization.”
Plintz adds, “In July, year-over-year sales prices went down five per cent in Canada, but in Calgary, we were still up 12 per cent. Reports suggest there may be a 20 to 25 per cent decrease in real estate prices for Canada and that sales volume may drop by 22 per cent. The cities that were leading the growth in price and in volume will feel the slowdown the most. Alberta should hold its own with resale prices without great declines as we are still undersupplied and the cost to build is higher than resale prices.”
“All in all, we are forecasting a very positive horizon for real estate in Alberta,” says Plintz.