Calgary’s real estate market is the most “normal” market in Canada but it’s still dealing with the aftermath of a dramatic rise in home prices in 2013, the 2015 drop in oil prices, and a more recent (hopefully temporary) drop in oil prices. As a result, the current balanced market conditions are leading to flat or downward drifting prices.
Today the condos market is balanced, economic growth is still above the national average, but the price of oil is still a drag the long-term outlook.
A stable oil industry would help real estate developers who began construction on 9,600 units in 2018 that will be complete in 2019 or early 2020. That’s more homes started than 2017.
Sales are down significantly from last year but appear to have stabilized. Calgary isn’t experiencing anything near the sales drops seen in Vancouver and Toronto. Assuming oil prices recover quickly, consider these levels of activity to be the new normal.
For house sales, which make up the bulk of the Calgary market, 2018 has been consistently slower than the preceding two years but this doesn’t look like the beginning of a market collapse. The consistently similar sales year-over-year are positively un-newsworthy.
Condo market activity is similarly consistent with prior years. More people bought condos in November than past years, but then this was offset by much slower sales in December.
For Calgary, current market conditions appear to be settling into a new normal. The Calgary real estate board says that the market is struggling to make gains but perhaps the market is still digesting the dramatic price gains seen in 2013 when the price of a home jumped over one hundred thousand dollars in a single year. As well, the market is balanced which is an indicator of a healthy level of supply and demand. It’s not clear that any gains are needed for a healthy real estate market.
Average prices have been zig-zagging while the benchmark price has drifted steadily downward. When looking at the chart below, keep in mind that 88% of homes sold in Calgary so far in 2018 were priced at $450,000 or less.
The downward price drift is likely a result of prices overshooting in past years. Rising interest rates are less of a factor in Calgary because houses are cheaper and incomes are higher on average than elsewhere in Canada.
Condo prices have seen a slightly steeper decline over the past few years. The benchmark condo price was $252,000 the the majority of working Calgarians.
If this is the new normal, people shouldn’t bank on huge house price increases but instead should focus on buying the home that gives them the lifestyle they want.
Despite claims to the contrary from the Calgary Real Estate Board (CREB), the Calgary house market is balanced. Analysis of how many months it would take to sell the homes for sale in a given month shows that the house market has only recently moved to a balanced market from a seller’s market, and condos have been in a balanced market for some time and recently moved to a buyer’s market. Condos are less than 20% of homes sold in Calgary, so they are not a major market driver.
The Calgary Real Estate Board (CREB) keeps advocating for less supply (and related commissions) but less supply would push the market back out of balance, handing sellers an advantage in negotiations. At Mortgage Sandbox, we believe that government should steer the market toward balanced market conditions and let buyers and sellers figure out a fair price with equal negotiating power.
Calgary stands in stark contrast to Metro Vancouver where the detached home market has 11 months of inventory for sale.
At present, there is a lot of uncertainty in Canadian real estate markets. Current house market conditions are balanced which is a healthy sign.
Sellers should consider that by March 2019 there is likely to be another interest rate hike that will put additional downward pressure on prices.
You could try to time the market, but nobody knows the best time to buy. If buyers wait, rising interest rates will erode their home buying budget, yet further price reductions would allow them to buy more home for less money. Based on the steady sales and price declines seen in the past 3 years, it appears prospective buyers can take their time. This is a welcome change from the imbalance market seen from 2000 through 2013. From a seller’s perspective, if you were planning to sell within the next 3 years, then now may be an opportune time. Most economists are anticipating three interest rate increases in 2019.
If your family is growing and you need a larger space, simply a place to call your own, or you believe timing the market is pointless, then take advantage of these tips to reduce your risk.
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