Metro Calgary
Real Estate Trends and Price Forecast

HIGHLIGHTS

• Home values in Metro Calgary have been rising since January of this year. However, there are mixed signals in the detached house market while the condo apartment market continues to be red hot.

• In comparison to recent years, Calgary’s house purchase demand is middling while apartment demand has skyrocketed.

• A multi-factor analysis identifies Metro Calgary as a moderate risk real estate market. Keep reading to find out why.

• Budgets for home purchases are under strain due to the significant increase in mortgage rates since their historical lows.

This article covers:

1. What is the current state of the property market?

2. Where are prices headed?

3. Should investors sell?

4. Is this a good time to buy?

1. What is the current state of the Calgary property market?

Home Price Overview

Metro Calgary has a population of roughly 1.6 million and was ranked 65 of the world's best 100 cities.

The pandemic turbocharged the Metro Calgary housing market, driving up prices at a remarkable pace and causing aspiring homeowners to be pushed further away from their dreams. And just when they thought things couldn't get trickier, rising interest rates now force even more potential buyers to sit on the sidelines.

Yes, prices are rising again, but it’s not a result of more buyers - it’s the result of fewer sellers.

For those contemplating selling their homes, time might be of the essence. Home values in many areas of Metro Calgary dropped double digits from the 2022 peak. While prices have been rising so far this year, there are mixed messages in the data, and the recovery might stall in the summer. Current conditions are leaving everyone uncertain about when markets will stabilise.

On the other hand, prospective homebuyers might consider waiting for a lighter mortgage burden. Mortgage rates are relatively high. Unfortunately, patience will be needed because rates are anticipated to remain high until 2024.

The market fundamentals are riddled with risk and uncertainty as consumer sentiment has taken a substantial hit. But remember, consumer sentiment can be volatile and unreliable predictor of future price trends.

Metro Calgary Detached House Prices

Calgary house prices are exploring uncharted territory.

We believe politicians are hoping to guide the market toward a typical annual real estate cycle with price growth in the range of 1 to 3% annually – in line with income growth.

It's true that Calgary's house prices stand out against the declining trend in other major Canadian cities like Vancouver and Toronto. While several factors contribute to this disparity, three key elements play a significant role:

1. Supply and Demand Imbalance:

• Limited Supply: Calgary has experienced lower active listings compared to other cities, leading to a shortage of available supply. On the other hand, Calgary has record-high home construction. As these homes are completed, they could ease the supply shortage.

• Steady Demand: Despite economic fluctuations, Calgary attracts new residents due to its relatively affordable housing and job opportunities. This consistent demand puts further pressure on the already constrained supply.

2. Investor Activity:

• Increased Investment: If we assume that the Canadian average of 20-30% of purchases being made by investors holds true in Calgary. These investors, attracted by higher rental yields compared to other cities, see Calgary as a lucrative market. A rental in Calgary generates twice the rental income per dollar spent on the home when compared to Vancouver. Investor buying activity further reduces available housing for owner-occupiers and contributes to price increases.

So, while other cities experience price corrections due to various factors, Calgary's housing market benefits from:

• Strong underlying demand from new residents arriving from other provinces and abroad.

• Limited supply, creating competition and pushing prices up.

• Higher rental yields compared to other markets, attracting investors.

However, it's important to note that:

• The market might eventually face correction if supply significantly increases or demand weakens.

• Affordability for residents could become a concern if prices continue to rise unchecked.

Overall, Calgary's housing market presents a unique picture within the Canadian context. While external factors can influence it, understanding the local supply-demand dynamics, investor activity, and price comparisons is crucial for deciphering its trajectory.

Metro Calgary New Construction Home Prices

Prices of new homes have shot upward since May 2023. Based on economic fundamentals, they might hit a ceiling soon.

Does this concern you? Read the Pros and Cons of Buying Pre-sale Homes

There is a record number of homes under construction.

Market Risk

Based on Mortgage Sandbox Analysis, Calgary is at moderate risk of a significant market correction.

Metro Calgary Condo Apartment Prices

Metro Calgary condo apartment values are rising at a brisk pace. A December 2022 CBC news report said that Calgary has attracted the attention of many Ontario real estate speculative investors. Our-of-province investors are attracted by lower price-to-rent ratios and landlord-friendly tenancy laws.

With more people working-from-home, we expect developers will begin marketing larger (i.e., 2 and 3 bedrooms) apartments to meet buyer preferences. As the supply of more generous floor plans comes to the market, it may depress the values for small floor plan condos.

At Mortgage Sandbox, we would like developers to build 4 and 5 bedroom condos because:

• Not everyone can afford to buy a house for their family.

• Canadians who now work from home need more room to segregate workspace from living space within their homes.

• Many Canadians with longer working hours find it challenging to stay on top of necessary house upkeep (i.e., mowing lawns, clearing eaves, shovelling sidewalks).

• Many people prefer to live in higher-density neighbourhoods with all the essential amenities within walking distance.

Metro Calgary Townhouse Prices

Very affordable for first-time homebuyers

Even in the current market conditions, a condo is well within reach for most Calgarians. A homebuyer household earning $99,000 (the median Metro Calgary household before-tax income) can get a $425,000 mortgage. That’s more than enough to buy a benchmark condo, but a house purchase is moving out of reach for most locals.

What about the rest of the West?

Read the Edmonton Home Price Forecast, Vancouver Home Price Forecast Forecast, and Okanagan Valley Home Price Forecast.

2. Where are prices headed?

There is a lot of uncertainty in the forecasts for 2024, 2025 and 2026. Many of the forecasters we've surveyed have different expectations for:

• Will the federal government achieve its aggressive immigration targets?

• How long will mortgage rates remain high?

• Will Canada experience a shallow or deep recession?

There is no consensus among economists.

How do we arrive at our forecast range? Check out our full assessment of the five factors that drive these forecasts. These five forces help explain why several forecasters are anticipating price drops.

At Mortgage Sandbox, we provide a price range rather than attempting a single prediction because many real estate risks can impact prices. Risks are events that may or may not happen. As a result, we review several forecasts from leading lenders and real estate firms, and we then present the most optimistic estimates, the most pessimistic prediction, and the average forecast. Want to learn more about real estate risk? We've written a comprehensive report explaining the uncertainty level in the Canadian real estate market.

Our forecast inputs:

• CMHC Housing Outlook

• Moody’s Analytics - Canada Housing Market Outlook

• Fitch Ratings Global Housing Forecast

• Reuters Housing Forecast Poll

• Royal LePage House Price Forecast

• RE/MAX Housing Market Outlook

• Canadian Real Estate Association Quarterly Forecast

• RBC Home Resale and Price Forecast

• TD Bank Economic Housing Outlook

• BMO Housing Outlook

• Calgary Real Estate Board Forecast

3. Should you sell your Calgary home?

From a seller’s perspective, the Calgary market provides sellers with a negotiating advatage, and the annual real estate cycle usually favours sellers in the first half of the year.

Sellers should always consult a mortgage broker early to prioritise flexible loan conditions and reduce the risk of mortgage cancellation penalties. Find out more about the benefits of a mortgage broker.

Planning to Sell? Check out our Complete Home Seller’s Guide.

4. Is this a good time to buy a Calgary home?

It’s hard to say, prices keep rising so there is a risk of being priced out of the market, at the same time there is a risk that the Calgary market could weaken due to the impact of the rest of Canada. It's almost impossible to time the market. If you are buying your forever home and don't plan to sell for 10 years then the risks of buying now are lower.

Regardless, the annual real estate cycle usually favours buyers in late summer.

If you are considering buying, be sure to drive a hard bargain and pay as close to market value as you can. Also, when it comes to financing, don't bite off more than you can chew.

Are you planning to Buy? Check out our Complete Home Buyer’s Guide so we can walk you through the end-to-end process and get you ready to buy your new home!

Here are some recent headlines you might be interested in:

• Bank of Canada: era of very low rates is likely over, people and firms must adjust (Reuters)

• Bank of Canada deliberations show some felt rates may need to rise higher (Global News)

• Bank of Canada likely done raising rates, to cut by mid-2024 say economists: Reuters poll (Reuters)

• Rising rates on homeowners and the shocks that lie ahead (CMHC)

• Upcoming mortgage renewals have homeowners concerned (Edmonton Journal)

• Canada is in for a cooler winter in real estate as sales slow: CREA (Global News)

• Home Prices in Canada Are So Stretched That Even Owners Want Them to Fall (Reuters)

• Posthaste: The risk of forced home sales is rising in Canada, warns economist (Financial Post)

• B.C. real estate market notches downward amid climbing interest rates, association says (Vancouver Sun)

• LACKIE: Bleak times for Toronto real estate market (Toronto Sun)

• Calgary Real Estate Board reports 17 per cent increase in October home sales (Calgary Herald)

• Vaughn Palmer: End of the line for single-family neighbourhoods in most of B.C.(Vancouver Sun)

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