Last updated November 5, 2018
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 and the 2015 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 above the national average, and the price of oil is fairly stable.
Stable predictable prices are good for developers who launched 23 condominium apartment projects in 2017, with a total of 1,600 units that will complete in 2018 or early 2019.
Sales are down slightly from last year and stable. It is nowhere near as bad as the sales drops seen in Vancouver and Toronto. Assuming oil prices remain stable, 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 and unexciting.
For Calgary, current market conditions could be the 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.
Average prices have been zig-zagging while the benchmark price has drifted steadily downward. When looking at the chart below, keep in mind that 45% of homes sold in Calgary in October 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. Again, even though the benchmark condo price was $261,700.
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.
Calgary has dipped into a sellers’ real estate market.
Analysis of how many months it would take to sell the homes for sale in a given month shows that the house market has now moved back to a seller’s market from a balanced market, and condos have been in a balanced market for some time.
The Calgary Real Estate Board (CREB) keeps seeking an increase in sales (and related commissions) but increased sales would push the market back out of balance, handing sellers an advantage in negotiations.
Calgary stands in stark contrast to Metro Vancouver where the detached home market has 10 months of inventory for sale.
From a policy standpoint we would expect the various levels of government to continue to encourage home building to maintain the market in balanced territory. Between 5 and 10 months worth of home supply, both buyers and sellers are on an equal footing. That seems fair to everyone.
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 January 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. The Bank of Canada has indicated that more interest rate increases will follow 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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