When it comes to Calgary’s condo market, realtors try to avoid the word slump. Unstable, perhaps. Flux. Or a somewhat sluggish rollercoaster.
And the blame is not only on the pandemic. Particularly in Calgary real estate, condos have been broadsided by a quadruple whammy. An oversupply. A spiked benchmark mortgage stress test rate that limits affordability for many buyers. Lockdowns and other pandemic impacts. And work-by-remote consumer trends.
According to the Altus Group Global Property Development Trends Report, Calgary’s apartment condo prices fell slightly, month-over-month, they were up by three per cent, year-over-year, to $258,609.
With the drastic fluctuations of the past eight months or so, it’s iffy to try and track and project the shifts of the Calgary real estate market, particularly the battered Calgary condo market. “From January until May of this year, there was some strong condo activity,” says Raymond Wong, vice president of Data Operations and Data Solutions at Altus Group.
“With pent up demand from 2020, a few owners with increasing prices were finally able to sell off existing condos at more favourable values. The first half of the year was exceptionally active to the carry over in demand from purchasers in 2020. Sales activity is probably slowing and the remainder of the year may see a return of pre-pandemic seasonal patterns.
While the pandemic ripples are the legitimate cause of many aspects of Calgary business and the Calgary economy and because affordability is an important real estate factor, COVID-19 doesn’t get much blame for the ongoing Calgary condo situation. “Over-supply is the main issue in the Calgary market rather than affordability, although purchaser power has been reduced with the introduction of the new mortgage stress test,” Wong pointed out.
“Some of the project launches that were supposed to occur in 2020 (based on a little uncertainty), instead were launched in 2021 capitalizing on strong demand and increase in consumer confidence. The number of new openings in Q2 2021 were double that of Q1 2021. And 11 projects launched in Q2, and six in Q1. Inventory levels based on the sales activity in the first half of 2021 have significantly lowered.”
According to Ann-Marie Lurie, the knowledgeable chief economist with CREB, “In terms of the apartment condominium market, one of the biggest challenges is the supply. The resale side of the market has struggled with the competition coming from the new builds.
“Despite some gains in prices over the past year, prices still remain over 15 per cent below previous highs. This is the only segment of the market that did not see conditions shift to favour the buyer, at the best point conditions were considered balanced. Recently we have seen supply levels rise again relative to the demand, and prices have trended down compared to earlier in the year.”
Altus’ Raymond Wong doesn’t consider the Calgary condo situation a slump. “Some buyers postponed their purchases in 2020 and moved to 2021, causing a big increase activity in the first half of 2021. Sales and new project launches are up in 2021 compared to 2020. This year’s sales will likely surpass 2019 activity, likely due to the pent-up demand and hesitation from potential purchasers in 2020, pushing their purchases into 2021.”
Gord Piper, broker at TSW Real Estate Group/CIR Realty is one of Calgary’s most respected condo specialists. “It’s good to judge the condo market by supply and demand and the number of months of inventory on the market. Over four months is a buyer’s market, 2.4 to 4.0 months is a balanced market and under 2.4 months is a seller’s market. We are currently at 5.3 months of inventory, so we are very much in a buyer’s market.
“The Calgary condo market went out of balance in 2015. The situation is 80 per cent a supply problem, caused mostly by new builds. Affordability may also be a reason,” he says, “but also the condo fees that have been steadily increasing. It’s common to see monthly fees over $500.”
According to Calgary condo experts, the 2022 outlook seems to be more-of-the- same. “Continued construction costs will continue to push prices higher,” Wong says. “Townhomes and low-rise will likely continue to be most in demand with purchasers seeking more space, especially for young families. Sales will likely return to normal, but unlikely to have the same sales activity surge we saw in the first half of 2021.”
CREB’s Lurie cautions that, “Until we see a rebound in migration, the Calgary condominium market will continue to struggle with elevated supply levels, relative to the demand in the market. This will prevent any significant movement on prices as we move into 2022.”
Piper says an improvement in Calgary’s condo market “would take a slowing of new-builds, although I don’t see that happening as builders are making money.
Also, more desirability to live downtown, but because COVID has had a negative effect on the number of people that want to live downtown since they can work by remote.
“I’m positive and hopeful but I believe we will stay in a condo buyer’s market throughout 2022, and it could take five years to see substantial changes.”