UP AND AWAY

Calgary resale home average prices to balloon to more than half a million dollars
Report says average to hit $517,016 in 2017
By Mario Toneguzzi
Calgary Herald November 20, 2013 

CALGARY - The average price for a resale home in Calgary will balloon to more than half a million dollars by 2017, according to a new real estate report released Tuesday.

The Conference Board of Canada’s Autumn Metropolitan Housing Outlook, commissioned by Genworth Canada, said the average price for all residential property in Calgary will grow from $431,760 this year to $517,016 in 2017.

“Calgary is facing a lack of inventory in particular areas,” said Tanya Eklund, a realtor with RE/MAX Real Estate (Central) in Calgary.

“Buyers looking for land for redevelopment and homes for renovation have been in very short supply and have driven up pricing due to multiple offers and low inventory. Low interest rates, strong unemployment rates, low vacancy rates and an overall strong economy have also added to strength in the Calgary market.”
Ben Brunnen, an economic consultant in Calgary, said the city’s population has grown each year for the past four years and this has helped drive residential construction activity and home prices.

“Net-migration can have a big impact on the housing market, as an influx of people and families into our city can often increase housing demand unpredictably,” he said.

“In the current market, vacancy rates are low, rents are high and population growth is strong. Combined with a good economy and favourable job prospects, people are more willing to buy than they were a few years ago. The last time we’ve seen comparable population growth was from 2004 to 2006, when the economy entered a boom. While we won’t see similar house price appreciations due to different global economics at play, Calgary house prices should stay strong for the near future.”

Calgary’s economy and housing demand continue to thrive as energy sector activity remains healthy. Rising GDP is spurring employment growth,” said the report.

“On the resale housing market front, solid sales will lead to sound price gains this year and next. The new housing market is benefitting from strong absorptions, which are trimming unsold stocks of new units and fostering new construction. The medium term also looks decent.

“Ongoing economic growth will continue to produce gains in resale sales and prices and keep housing starts above their 20-year average. Good housing affordability, measured against local incomes, is an ongoing benefit to this market and allows single-family starts to maintain a high market share compared with other cities covered in this report.”
The report said summertime flooding in Calgary will limit Calgary’s GDP to 3.3 per cent growth in 2013, modest by recent standards. Output will rise a slightly faster 3.4 per cent in 2014, spurred by government-funded rebuilding efforts.

The job market will continue to expand, with annual growth of 2.4 per cent this year and 2.8 per cent in 2014 cutting the unemployment rate from 4.9 per cent this year to 4.6 per cent in 2014. Economic health should continue between 2015 and 2017, with GDP expanding roughly three per cent and employment rising about two per cent each year, it said.

“Calgary’s strong economic fundamentals allowed its resale market to largely shrug off the floods. Seasonally-adjusted sales and the average resale price actually rose during June, the flood month, and have subsequently advanced,” said the report.

“Price growth is accelerating, although increases remain far below boom-era advances. We expect the market to remain balanced and price growth to stay healthy in 2014 and over the following few years.”
The report’s forecast for average prices over the next few years and annual growth rate are: 2013, $431,760, 4.7 per cent; 2014, $451,798, 4.6 per cent; 2015, $473,470, 4.8 per cent; 2016, $497,139, 5.0 per cent; and 2017, $517,016, 4.0 per cent.

Forecast for sales in the resale market for the next few years and annual growth rate are: 2013, 28,111, 5.5 per cent; 2014, 28,793, 2.4 per cent; 2015, 29,418, 2.2 per cent; 2016, 30,027, 2.1 per cent; and 2017, 30,620, 2.0 per cent.
“Unsurprisingly, Calgary’s resale prices are rising briskly. Year-over-year growth has averaged a solid 4.6 per cent in the latest four quarters, including a first quarter jump near eight per cent,” said the report. “These increases will lift Calgary’s average price 4.7 per cent in 2013, the largest gain since 2007 and finally exceeding that year’s peak value. Similar price growth is expected between 2014 and 2016, with a slight tapering in growth to four per cent in 2017.

“These increases will slightly erode local housing affordability. Principle and interest charges on Calgary’s average resale home were under 16 per cent of average household income the last two years and are expected to remain there in 2013. But house prices will rise faster than incomes, pushing the ratio to roughly 20 per cent by 2017. This remains decent, as affordability is better only in Edmonton, Ottawa, and Winnipeg among the cities in this report.”

The report said buoyant housing demand is also energizing the new home market. Absorption of new units averaged 11,200 units in the four quarters to the second quarter of 2013, up 25 per cent from a year earlier. This included a surge to an annualized 15,000 units in the second quarter, the most since 2008. This strength will lift absorptions to a full-year total of 12,140 units in 2013, up 25 per cent from 2012. Another increase of nearly six per cent in absorptions is expected for 2014, but still trailing the peak of 13,700 units reached in 2008.

“Healthy new-unit take-up fuelled a big jump in housing starts to 13,186 units in 2012, more than double the recessionary trough in 2009, but well off peak levels of the last decade,” it said. “We expect starts to ease a modest 2.7 per cent in 2013 as an 11 per cent dip in multiple starts slightly outweighs a seven per cent gain in single-detached starts. For 2014, rebounding multiple starts will fuel a five per cent increase in total starts despite relatively unchanged single-detached construction.

“In the medium term, we expect housing starts to ease slightly, as both single-family and multiple construction dip. By 2017, we expect 11,400 units to get under way; this would slightly outpace the 20-year average of housing starts. While multiple starts are expected to increase their market share, they are forecast to make up only 52 per cent of total starts between 2013 and 2017.”

TOO FEW

Lack of inventory fuelling price growth for Calgary housing market

Strong economy and influx of professionals

BY MARIO TONEGUZZI

CALGARY HERALD OCTOBER 10, 2013

CALGARY — A continued lack of inventory is fueling house price growth in Calgary.

The Royal LePage House Price Survey, released Thursday, shows strong year-over-year price increase in all housing types in the city as competition for homes is being driven by a strong economy and the influx of professionals.

The survey said average home prices were particularly buoyant in the third quarter with detached bungalows increasing 7.2 per cent year-over-year to $465,411, standard condominiums increasing 5.6 per cent to $263,087 and standard two-storey homes increasing 3.4 per cent to $446,411.

“A sustained period of low housing inventory coupled with a healthy economy and an influx of corporate sector workers has pushed prices up further,” said Ted Zaharko, broker/owner, Royal LePage Foothills. “For some time now too many homebuyers have been chasing too few properties.”

He said inventory is low in all categories, but particularly in detached bungalows, which are much rarer in Calgary compared to cities like Edmonton.

“Buyers are acting very quickly when homes are put up for sale, which is leading to frequent multiple offer situations on all housing types,” said Zaharko. “The aggressiveness of buyers is making it very difficult for first-time buyers to break into the market.”

He said third quarter activity was the most robust the Calgary market has seen in years, with buyers eagerly making offers on the limited inventory. In addition to normal demand, there was some extra activity coming from flood victims who were looking to move to locations on higher ground.

Nationally, the average price of a home in Canada increased between 1.2 per cent and 4.1 per cent in the third quarter of 2013.

The survey showed a year-over-year average price increase of 3.7 per cent to $418,686 for standard two-storey homes, while detached bungalows rose 4.1 per cent to $381,811. During the same period, the average price for standard condominiums saw a more moderate increase, rising 1.2 per cent to $246,530. Sales volumes surged in a number of regions, as Canadians re-entered the housing market after sitting on the sidelines for more than a year — marking the end of the most significant housing market correction since the 2008-2009 global recession, said Royal LePage.

Early signs in October indicate Calgary’s housing market is continuing its trend of increased sales and prices.

According to the Calgary Real Estate Board, month-to-date up to Wednesday, there have been 624 MLS sales in the city, up 37.14 per cent from the same period last year. The average sale price has increased by 7.82 per cent to $460,509 while the median price is up 6.96 per cent to $415,000.

New listings of 850 have risen by 10.10 per cent but active listings are down by 22.73 per cent to 3,927. Average days on the market to sell have also dropped by 6.52 per cent to 43 days.

“Prices are continuing to climb because of supply and demand. We have significant demand and we have across the board limited supply regardless of the price ranges. There is not a substantial variety to choose from and in some cases, such as in the case of bungalows, there has been a short supply in Calgary and new listings often get multiple offers,” said Rachelle Starnes, a realtor with Royal LePage Foothills in Calgary.

“In support of this statement, we are seeing in the Royal LePage offices more quick sales and multiple offers in the last quarter than previous quarters. The buyers are anxious and know that once a new listing comes onto the market, they need to act quickly. Having said that, there are still good listings sitting on the market that are a puzzle as to why they are not getting the proper activity. We just listed a property in the community of Bel Aire this week that will sell for a minimum of 10 per cent more than before the flooding occurred and may even see multiple offers at the higher price. Prices in the higher ground areas are escalating with the higher demand in the central areas of the City.”

Photo By: tommaync

RISE AND SHINE

Low inventory, high demand pushing Calgary house prices upward
Royal LePage forecasts prices to continue to rise

By Mario Toneguzzi 

Calgary Herald July 9, 2013

A combination of low inventory and strong demand has driven prices of all housing types in Calgary higher, according to a report released Tuesday by Royal LePage.

The real estate firm, in its House Price Survey and Market Survey Forecast, said that year-over-year in the second quarter detached bungalows increased by 5.9 per cent to $457,889, condominiums were up six per cent, to $261,933, and standard two-storey homes rose by 6.7 per cent to $453,789.

“Inventory is low across all categories right now, and this is driving prices up,” said Ted Zaharko, broker and owner of Royal LePage Foothills, in a news release. “When a listing comes up, there is a swarm of potential buyers, and multiple offers are common. Condominiums are profiting from the spillover effect — buyers who are having difficulty breaking into the tight bungalow market are moving to the condominium market, to the point where inventory is tightening there as well.”

Zaharko said the recent flooding in Calgary may cause some “irregular activity” in the short-term but it won’t have a long-term impact on sales or prices.

He said prices are expected to continue to rise in Calgary as are overall sales.

“Unit sales would be greater if more inventory were available, but until additional inventory comes onto the market, growth in unit sales will be somewhat tempered,” he said.

Nationally, in the second quarter, standard two-storey homes and detached bungalows both showed a year-over-year average price increase of 2.7 per cent to $419,614 and $386,547, respectively. Average prices for standard condominiums rose 1.2 per cent to $248,750.

Royal LePage is forecasting average house prices in Calgary to rise year-over-year by 6.5 per cent this year to $439,000 while sales will increase by 3.3 per cent to 27,500 transactions.

Across the country, the real estate firm is forecasting a three per cent jump in prices to $374,650 with a decline of 5.0 per cent in sales to 430,500 units.

According to the Calgary Real Estate Board, year-to-date until July 8, there have been 12,763 MLS sales in the city, up 4.71 per cent from the same period last year. The median price has increased by 4.99 per cent to $400,000 while the average price has risen by 6.75 per cent to $458,371.

A TEXTBOOK MARKET?

What happened to the expected Alberta real estate boom?
Market influencers tempering demand
By Mario Toneguzzi
Calgary Herald April 11, 2013

CALGARY — Several ‘market influencers’ have kept the reins on the expected Alberta real estate boom, says a new report on the housing market.

The report, by Don Campbell, senior analyst and founding partner of the Real Estate Investment Network, said debate is raging about why the market isn’t booming like it did in 2006 and 2007 when the job market and population in the province were growing at the same rates as they are today.

“The real difference this time is hidden in the strong forces of today’s market influencers. It is very true that the market drivers are all in place to support a large growth in housing purchase demand and price increases, in fact it is a textbook market for a boom,” said Campbell.

“In Alberta, the GDP and job growth have driven very strong population growth which has led to low vacancy rates not experienced in this province for many years. Street rents are jumping due to the rental supply/demand inequality. So, on the surface that means Alberta should be experiencing another one of those unsustainable booms. Well why isn’t it? And is there one still in the works?”

He said certain wild cards can throw a market off its prescribed cycle for periods of time.

“So, despite all of the market drivers being in place to push the Alberta real estate market into its next boom cycle the market continues to underperform its economics. Why? Simply, there are market influencers in play and that is why we are not yet seeing the expected rush into the market demand,” he said.

They include the once-bitten, twice-shy attitude equating into a local lack of confidence in the market. Many Albertans made their first home purchases during the previous boom. They were hit hard when the financial crash came. This has tempered enthusiasm for the market now.

Tighter mortgage qualification rules have also tempered market demand.

Overall consumer confidence in real estate is taking a hit with many recent reports and headlines on the state of the Canadian market saying it may be over-priced or overvalued.

A large portion of Alberta population growth is from two key demographics who are less likely to buy a house immediately — immigrants and ‘Echo-boomers’.

According to the Calgary Real Estate Board, total MLS sales year-to-date in the city until April 10 were 5,798 transactions, up 3.72 per cent compared with the same period last year.

The average sale price this year has risen by 8.08 per cent to $451,246 while the median price is up by 5.92 per cent to $397,000.

Ann-Marie Lurie, CREB’s chief economist, said the organization never felt the economy was about to boom, based on several factors.

“The first consideration is the economy,” she said. “In the 2005-2007 period, we had significant growth in both the oil and natural gas sector, economic growth as of late has only been driven by the oil sector. While this has helped support growth, there have been some challenges regarding bottlenecks and price discounts which has impacted employment growth prospects in the province. We also shouldn’t forget that the natural gas market continues to struggle. Our economic growth is progressing but at a slower pace, and forecasters also estimated that employment growth and net migration would ease this year, two factors pointing towards slower demand growth in housing.

“The next consideration is fundamentals in the housing market. Inventory levels were generally more elevated in the resale market, and it has taken some time to absorb some of the excess in the market. While this has occurred primarily in the single-family market, it has only started to spillover into the surrounding areas, the condominium market, and the new home market. When considering all the options available to consumers, there was sufficient choice to prevent any significant shortage in the entire housing market, which was the case in 2006-2007, causing a unsustainable jump in home prices.”

She said she is not surprised that the market didn’t boom, given the economic backdrop and current supply in the market.

Lai Sing Louie, regional economist for the Prairies and Territories for Canada Mortgage and Housing Corp., said market conditions in Alberta’s housing markets today are different from the boom.

“Some of the differences include higher household debt as well as more prudent lending conditions today. Also, some of the transactions in that period were investor driven and we have not experienced that to the same extent today,” he said.

The underlying economics and Market Drivers state that the market should be on fire, just like it was back in 2006 and 2007 – that is unless you begin to factor in these influencers, said Campbell.

“Let us make sure we are analyzing today’s markets with today’s conditions and not compare them to previous boom-bust cycles. Each cycle has its own influencers that either heat up or cool down a market and this current cycle from 2006 until today is the perfect proof of that,” he said.

“As long as the drivers are strong, the market is structurally strong, no matter what the influencers are doing. The concern should arise when the drivers are weak and the influencers are pushing the market upwards with no support. That is not what is happening in Alberta right now; in fact, the drivers remain strong despite the headlines.”

Ben Brunnen, chief economist with the Calgary Chamber of Commerce, said the province is definitely seeing all of the signs of strong economic and potentially housing growth.

“Net inter-provincial migration, population growth is up. Unemployment is low and GDP growth is relatively high,” said Brunnen. “I think we’re seeing probably a bit more of a cautious consumer out there. I do think we’ll see some strong real estate activity happening in Calgary but not like in the boom.

“I think there continues to be some caution in the market for a number of reasons. While Alberta’s economy is good, the global economy continues to be shaky, especially Europe and the United States. So people don’t have that strong confidence per se that this economic activity is going to be sufficiently robust that they should buy a house.”

HOUSING STARTS SHY

Housing starts show rebound
Figure still shy of level seen in 2008
By Dan Healing, Calgary Herald
February 9, 2010

The home building industry in Calgary staged a strong rebound in January from last year's 18-year depths, but failed to recoup all the ground lost since the same month in 2008.

According to Canada Mortgage and Housing Corp., total housing starts in the city reached 514 units last month, more than double the 243 in January 2009 but 28 per cent lower than the 711 units started in January 2008.

Richard Cho, CMHC's senior market analyst for the city, said the general direction for new housing is stable.

"Housing activity is encouraging in January. It's a good start to the year," he said.

"We're still seeing a fair number of singles being started, if not the same level of activity we saw in the latter part of 2009. The momentum is still being carried over to this year."

He said fewer incentives are expected to be available for buyers this year due to the stronger market, but higher interest rates expected at midyear will tend to prevent the market from growing beyond a sustainable level.

Todd Hirsch, senior economist for ATB Financial, agreed 2010 will be stable, noting a cold January also likely slowed housing start statistics.

"It's coming off a bit of a surge we saw in fall of last year . . . (but) there's no sign that housing starts are collapsing at all," he said. "They're up from where they were a year ago, so that's positive, and overall I think we'll have a balanced year of housing starts."

He said there will be fewer construction jobs on commercial projects this year, but more in home building and institutional and infrastructure projects.

Both single-detached and multi-family housing starts were up in January, with builders starting work on 413 homes, versus 204 units a year earlier, and 101 multifamily units breaking ground, up from 39 units in the previous year.

Cho said there were no apartment units started, reflecting the oversupply of inventory in Calgary. He predicted the trend this year will be toward medium-density housing.

The peak January for single-family starts came during the overheated economy of 2006, when 838 houses contributed to 1,086 housing starts.

The more volatile multifamily sector posted its biggest January in 1978, when 1,718 units were started.

Provincially, housing starts in Alberta's seven largest centres totalled 1,271 units in January, up 52 per cent from January 2009.

Nationally, the seasonally adjusted annual rate of housing starts reached 186,300 units in January, up from an annual rate of 176,100 units in December.

According to final figures, housing starts for 2009 totalled 149,081 units, with activity improving as the year progressed.

In the Prairie region, the seasonally adjusted annual rate of urban starts decreased by 4.8 per cent in January from the previous month.

Also on Monday, the Canadian Real Estate Association revised its forecast for MLS home sales in 2010.

It forecasts national sales activity will reach 527,300 units in 2010, up 13.3 per cent from 2009. This would represent an annual record -- 1.2 per cent above the previous peak in 2007.

Sales in Alberta are forecast to be 63,050, up 9.1 per cent from 2009.