Sales in 2013 up 30% and near peak of 2005
Calgary’s new condo market was booming in 2013 with sales up by 30 per cent from the previous year and coming close to the peak of 2005 when prices were a lot less for a property, particularly in inner-city neighbourhoods.
A report by the Altus Group Limited says sales in the city reached 5,400 last year for new townhouse and apartment units. At its peak almost a decade ago, sales in the market hit 5,900.
“The key thing is that 2005 was before major price increases,” said Matthew Boukall, director of residential advisory services for Altus Group Limited. “This is the highest sales absorption we’ve ever seen at current pricing levels.
“In 2005, a downtown condo was half the price it is today.”
In a report, authored by Boukall, it said the very strong demand in the market has reduced available inventories of new condos as suites were absorbed faster than new project launches could add stock, creating scarcity of supply which pushed prices higher.
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It said average prices increased for townhouses and apartments by $20,000-$30,000 in the past 12 months.
“While both the suburban and inner-city markets have seen price growth and strong demand in 2013, these two major sectors will experience different market and supply factors in 2014 which will influence demand and pricing in the upcoming market,” said Boukall.
Calvin Buss, president of Buss Marketing in Calgary, said the city’s condo boom is being fuelled by a strong economy, strong growth in employment and in-migration as well as a very low rental vacancy rate.
“I came to Calgary in 1980 and between 1980 and 2013 we only built one rental building in the downtown,” said Buss. “That’s 33 years, in a city that’s exploding and doubled in population . . . Now I would think the dynamics have changed so much with interest rates and very low vacancy there’s a huge number of planned rental buildings from the pension funds and the REITs (Real Estate Investment Trusts).
“A lot of people are buying condos for lifestyle issues as much as for alternative choicing to higher priced housing forms.”
According to the Calgary Real Estate Board, condo apartment MLS sales in 2013 reached 4,007 transactions, up 14.45 per cent from 2012 and the average sale price jumped by 5.17 per cent to $299,517. The condo townhouse sales were up by 22.40 per cent to 3,180 with the average price increasing by 7.73 per cent to $341,116.
Boukall said available inventory of new condo units declined in 2013 as strong demand outpaced developers’ ability to add new supply, particularly in the suburban sector where demand for townhouse and affordable apartment product far outstripped new supplies.
“In 2014, expect continued tightening of suburban land supplies as the available land in new greenfield communities is rapidly developed and absorbed by the market,” said Boukall in his report. “An increase in the number of active projects in the north part of the city is expected to shift some consumer demand from the south, where fewer new projects are anticipated in 2014. In the inner-city, supplies are anticipated to increase as more projects, both low-rise and high-rise, enter the market following the strength seen in 2013.”
Also, he said the higher prices seen at new projects in late 2013 is expected to translate into modestly slower sales as affordability becomes a more relevant concern, in comparison with the extremely rapid absorption of comparably more affordable product in spring 2013.
The report said tighter land supply and price growth within the City of Calgary is expected to push more consumers to the relatively affordable satellite communities, which are expected to experience an increase in demand for multi-family housing in 2014. This should result in stronger sales in Airdrie, Cochrane and Chestermere where new multi-family projects are expected to launch and attract buyers out of the Calgary market based on the improved affordability.
“With higher prices, potentially weaker affordability, and a pent-up demand that is being satisfied, the sales forecast for 2014 is lower than the previous year at levels closer to those seen in 2012. The decline into 2014 does not necessarily mean the market conditions will be substantially weaker, but rather see less influence from the investor segment of the market along with declining supplies of affordable housing in the suburban sectors,” said Boukall’s report.
(Original Article here – Calgary Herald, January 30th, 2014)