Just as the sudden pandemic created a frenzied scramble in uncharted territory for researchers, health professionals and the world, the suddenly hot real estate market is creating an exciting and sometimes confusing scramble in uncharted territory for Calgary home buyers, sellers, builders and real estate professionals.
While the hot market impacts both key segments of Calgary’s real estate market – new homes and re-sales – differently, both share the irresistibility of historic low interest rates as well as the effects of the 2021 version of the new, federal mortgage rules.
Although some (primarily re-sale) factors make the Calgary real estate market unique, the phenomenon of a post-pandemic hot market is certainly not limited to Calgary.
According to CREA, the Canadian Real Estate Association, it’s an unexpected fluke from coast-to-coast and throughout North America. CREA stats and numbers show that, nationally, Canada’s average home prices spiked by nearly 32 per cent (year over year), sales hit a new all-time record and the hot market is also happening in most parts of the U.S.
“There was absolutely no chance we thought this would happen, certainly not to the levels that we have been tracking since the spring,” says the plugged-in Ann-Marie Lurie, chief economist of the Calgary Real Estate Board. “It may already be settling down a bit but it continues to surprise me.”
She explains that low interest rates get much of the credit – and blame – and are the primary cause of the hot market’s strong demand. “It dates back to the last half of 2020 and is fuelling into this year. Low discount rates that have brought people back into the market, as people were pushed out in 2018 and 2019, with some of the lowest sales per capita on record.
“Overall, we are already seeing some signs that inventory is catching up to market demand. And while demand is expected to remain strong for the remainder of the year, the pace of growth is expected to ease. This combined with more supply becoming available, helping the market return to more balanced conditions as we move into the fall.”
With a separate set of new wrinkles and speedbumps, Calgary’s new home builders are also working with a shifting real estate market. “The lockdowns have underscored how we live within the spaces we call home,” explains Charron Ungar, the respected CEO of Calgary’s Homes by Avi Group of Companies.
“Virtual connectability has progressed considerably since we were forced to get comfortable with it, last year. It seemed everyone in the family was working remotely, and that meant that traditional room uses no longer applied. Dining rooms became home offices and kitchens switched to classrooms.
“What hasn’t changed is that affordability in new homes is ultimately tied into the size of the structure. Many of our home models offer home offices but our latest focus is maximizing flexibility within the home, allowing for an easier transition of spaces from one use to another.”
CREB constantly monitors the fluctuations of the Calgary re-sale market and emphasizes that hot market price spikes and sales upticks are not in every segment of the market. “The condo market has probably been the one product type that has struggled the most, even through this recovery we have been seeing,” Lurie says.
“We finally started to see some balanced conditions this year but condos are sensitive to price, and condo prices have still fallen more than 15 per cent from 2014. There is a stable demand for condos but there’s still quite a lot of supply which will limit price growth. We could see sales activity rise, but so will supply and that puts a limit on price growth. We are not expecting significant price recovery in the resale condo market over the next two years.”
Real estate professionals are both ambivalent and somewhat concerned about the new federal mortgage ‘stress test’ rules. “It’s not as drastic a change as the mortgage changes in 2018 and while it is definitely causing some disruption in terms of what people can buy, it won’t totally derail demand,” she notes.
“The qualification rate with the new mortgage rules may make it harder to get a mortgage and impact what first-time buyers can afford. It may push people into other product types, depending on what they can afford but, ultimately, rates are still quite low.”
Charron Ungar’s positivity emphasizes that “interest rates have helped many consumers achieve homeownership which is a great thing. In the longer term, I believe that consumers will be putting a greater emphasis on location based on proximity to nature and existing amenities combined with homes that provide greater inherent flexibility as their needs changed over time.
“Those changes could be immediate, like we saw when COVID hit, or more progressive over time as families mature,” he says from experience. “Now it’s about secure employment moving forward. I see an incredibly bright future for Calgary, but it will take a lot of hard work and commitment from both government and business to make Calgary an attractive place to do business and raise a family.”