YYC & YYZ OUTPERFORM

Calgary and Toronto office markets outperform
Calgary has nearly 6 million square feet under construction
BY MARIO TONEGUZZI
CALGARY HERALD SEPTEMBER 25, 2014

CALGARY - Lacklustre job creation continues to impact demand for commercial real estate in Canada, but office markets in Calgary and Toronto are outperforming the rest of the country, according to the CBRE Limited’s National Office and Industrial Third Quarter 2014 Statistical Summary released on Thursday.

The report said tepid job growth has undermined office leasing activity in Canada, but has been unable to stem an historic industrial construction boom.

“The Canadian economy may not be firing on all cylinders, but the Toronto and Calgary office markets turned out quite a performance last quarter,” said John O’Bryan, chairman of CBRE. “It was a bit of a have or have not summer. The standout office markets were exactly that, while other areas were fairly quiet. One assumes that strong office leasing activity in core markets will translate into more widespread office demand in the year ahead.”

The national office vacancy rate dropped for the first time in two years, retreating 10 basis points to 10.3 per cent in the third quarter. Office vacancy had been increasing at a slower pace in recent quarters. Demand for downtown office space in Toronto and Calgary tipped the scale and resulted in a long awaited drop in vacancy, said the report.

Calgary’s overall office vacancy rate of 10.1 per cent fell from 10.6 per cent in the second quarter while in Toronto it dropped from 9.6 per cent to 9.2 per cent. Calgary’s downtown market saw vacancy drop to 9.1 per cent from 10 per cent and Toronto’s downtown market dipped to 5.3 per cent from 6.1 per cent.

In the third quarter, Calgary’s office market had 511,021 square feet of positive absorption and Toronto’s was 712,564 square feet.

Office space currently under construction is 5.6 million square feet in Calgary and 7.1 million square feet in Toronto. Nationally, there is 21.7 million square feet of office space under construction.

Greg Kwong, executive vice-president and regional managing director with CBRE in Calgary, said the drop in vacancy in Calgary is a positive sign but on the negative side the amount of sublet space in the downtown as a percentage of the overall vacancy is at a fairly high level.

For example, in the downtown that percentage was 41.6 per cent in the third quarter, up slightly from 40.4 per cent in the second quarter.

“Any time it’s over 35 per cent of the overall vacancy that means there’s a lot of companies mostly oil and gas that are giving up space. If that continues, that will create negative pressure on the downtown core,” said Kwong. “But overall there seems to be a good sense of optimism. There are deals happening.”

The CBRE report said the Canadian industrial market continues to be characterized by limited availability as tenants remain hungry for industrial space across the country. Demand outweighs supply in most areas, especially for modern distribution facilities.

The overall industrial availability rate fell 10 basis points quarter-over-quarter to 5.3 per cent. In Calgary, it is 4.5 per cent, down from 4.6 per cent in the previous quarter.

There is 4.4 million square feet of industrial space under construction in Calgary and 19.9 million square feet across the country.

“The industrial market is very solid,” said Kwong. “In every size, category or asset class, there’s leasing activity whereas a year ago that was not the case. There was only hot spots in certain size ranges.”

NEWS THAT MAY PUT A SPRING IN YOUR STEP

As mortgage rates fall, realtors anticipate boost to an already strong market
By Mario Toneguzzi 
Calgary Herald May 28, 2014 

CALGARY - Calgary’s hot housing market has received another incentive that could boost sales activity even more in the coming days.

Mortgage rates are starting to come down again right during the busy time of the year for the industry.

Ann-Marie Lurie, chief economist with the Calgary Real Estate Board, said lower mortgage rates will help affordability in the local housing market.

“It can actually help mitigate some of the increases in pricing that we’ve seen in Calgary’s market,” she said. “We’ve had that price growth. We’re still more affordable than we have been for some time so that’s not really the issue per se. But when you have the mortgage rates come down, that can help especially as we’re facing rising pricing.

“We’re not in any concern of overheating our market but with new listings starting to improve this can actually help some of those people who were really on that cusp. They can get into the market.”

Scotiabank announced this week it was lowering its fixed five-year mortgage rate to 2.97 per cent and its five-year variable rate to 2.47 per cent. The rate is effective until June 7.

Investors Group recently offered a 1.99 per cent rate for a 36-month closed, variable-rate mortgage, but Scotiabank is the first of the big banks to push its fixed rate down below three per cent in recent months.

According to CREB, year-to-date until May 27, there have been 10,805 MLS sales in the city, up 13.38 per cent from the same period last year. The median price has risen by 7.03 per cent to $428,000 while the average sale price is up 5.85 per cent to $480,416.

“Housing activity in Calgary has been fairly robust supported by a variety of factors. Along with employment growth, rising incomes and strong net migration, relatively low mortgage rates has also contributed to the demand for housing,” said Richard Cho, senior market analyst in Calgary with Canada Mortgage and Housing Corp. “Mortgage rates have been low for a couple of years and this has helped people, such as first-time home buyers, purchase a home.

“A decline in mortgage rates alone will not necessarily lead to an increase in sales. The decision to purchase a home often involves both personal and financial considerations.”

So far in May, MLS monthly sales in Calgary are up 17.74 per cent compared with a year ago to 2,489 transactions. New listings have also risen by 17.82 per cent to 3,756 but as of Tuesday active listings were down 5.76 per cent from the same time last year to 4,481. The median price in May of $435,000 has increased by 7.41 per cent and the average sale price is up by 5.40 per cent to $485,866.

“Will this (lower mortgage rates) affect the market in Alberta? Absolutely not. The market already is strong, the sales moving well, supply is an issue and Calgary is poised to be the hottest market in the country again this year,” said Don Campbell, senior analyst with the Real Estate Investment Network. “These lower rates will have a lot of people talking, but little or no measurable effect in this part of the world. Out East, it will as that market needs stimulus.”

Campbell said the biggest problem with some mortgages is hidden in the restrictive terms. These low rates will spark increased traffic to the banks, but consumers must be wary before signing asthe penalties and restrictions are often prohibitive, he added.

“Spring is prime fishing season in Calgary, and not just for trout. With the recent surge of new listings, I think we’re seeing a little fishing from sellers, too,” said Scott Bollinger, broker with ComFree Commonsense Network. “Sellers are recognizing the main market factors — good economy, strong housing price gains, tight inventory, seriously low average-days-on-market — and some seem to be fishing for their price rather than settling for market price. They’re trolling the waters for motivated buyers, and my advice to these buyers is: do your homework and stick to a neighbourhood’s comparable numbers to avoid taking the bait.

“Calgary buyers are smart. They know when cheap money is cheap money. And sub-three per cent five-year fixed rates are cheap. It’ll only add fuel to the hot housing market. The open question is: how much and for how long? Will Calgarians see this as a temporary phenomenon, flock to the banks, and boost the market in the short term? Or will they see it a longer-term trend and bide their time, which would reduce the urgency and the immediate impact on the market? Either way, the rates give motivated and qualified Calgarians more purchasing power in what’s still a relatively affordable market. I think that points to steady price gains throughout 2014.”

A BIG HIKE

Calgary house price growth outpacing rest of Canada
9.6% annual hike for repeat home sales to record level
BY MARIO TONEGUZZI 
CALGARY HERALD MARCH 12, 2014

CALGARY - Calgary’s housing market continues to shine compared with the rest of the country as local residental real estate prices showed the highest growth rate in Canada in February, according to a report released Wednesday on repeat home sales.

Calgary prices rose by 9.6 per cent year-over-year and by 1.1 per cent month-over-month - both the best in the country and to an all-time high for the city, said the Teranet-National Bank National Composite House Price Index.

Nationally, of 11 centres surveyed, prices were up 5.0 per cent from last year and by 0.3 per cent from January.

The index is estimated by tracking observed or registered home prices over time using data collected from public land registries. All dwellings that have been sold at least twice are considered in the calculation.

The trend in price increases in Calgary does not appear to be changing in March. According to the Calgary Real Estate Board, so far this month from March 1-11, the average MLS sale price in the city is up 5.28 per cent from the same time a year ago to $480,345 while the median price has increased by 7.25 per cent to $429,000. CREB stats indicate there have been 796 MLS sales so far this month, up 10.71 per cent from last year but new listings are down 4.05 per cent to 1,114 and active listings are off by 18.80 per cent to 3,049.

The Teranet-National Bank report said that for the second month in a row, prices for Canada as a whole rose to an all-time high, though new records were set in only two of the 11 metropolitan markets surveyed - Vancouver (for a fourth straight month) and Calgary (for the first time since September 2007).

The gain from a year earlier was well above the cross-country average in two of the 11 markets, Calgary and Vancouver (7.7 per cent). It was slightly above the average in Toronto (6.1 per cent) and Edmonton (5.3 per cent), equal to the average in Hamilton (5.0 per cent) and below it in Winnipeg (3.5 per cent) and Montreal (1.9 per cent).

In Halifax (4.7 per cent) and Ottawa-Gatineau (0.6 per cent), prices were down from a year earlier for a second consecutive month. In Victoria (3.4 per cent), home prices have been down from a year earlier for 12 months now. Quebec City posted its first 12 month deflation in 15 years (2.0 per cent). It is the first time since October 2009 that there is price deflation in at least four of the regions covered, said the report.

“In February the east-west dichotomy became more pronounced than ever,” it said.

Home prices were up from the month before in all five markets of Western Canada - Calgary, Vancouver and Victoria (0.9 per cent), Edmonton (0.6 per cent) and Winnipeg (0.5 per cent). The rise in Victoria ended a run of four consecutive monthly declines. For Vancouver it was the 10th consecutive monthly increase. In the six markets of central and eastern Canada, the only monthly rise was in Montreal (0.7 per cent), the second advance after six months of flat or declining prices. Prices were down 0.1 per cent in Toronto, making February the fourth month without a gain in the last six. For Ottawa-Gatineau (0.8 per cent) it was the sixth decline in a row, for Quebec City (1.7 per cent) the sixth in seven months. For Halifax (1.7 per cent) it was the third decline in a row, said the report.

SALE PRICE JUMP

Calgary repeat home sale prices rise 7.1%
Second biggest jump in Canada behind Vancouver’s 7.5%
By Mario Toneguzzi 
Calgary Herald February 12, 2014

CALGARY - Calgary had the second best year-over-year growth rate in prices for repeat home sales in January, according to the latest Teranet-National Bank National Composite House Price Index released Wednesday.

It said Calgary’s annual increase was 7.1 per cent which was behind only Vancouver’s 7.5 per cent.

The national composite, of 11 major centres surveyed, rose by 4.5 per cent.

The index is estimated by tracking observed or registered home prices over time using data collected from public land registries. All dwellings that have been sold at least twice are considered in the calculation.

Toronto saw an annual increase of 5.8 per cent.

Sonny Scarfone, economic analyst with TD Economics, said the index surprised on the upside with a larger gain in momentum than expected across the country.

“Home price gains are still exceeding income growth by a considerable margin, especially in larger real estate markets like Toronto and Vancouver. A low supply of new listings is an important contributor to the upward pressure on prices,” said Scarfone.

“However, as U.S. and Canadian economic growth accelerates and the Federal Reserve continues to taper its quantitative easing program, North American bond yields are likely to rise over time and this will be reflected in mortgage rates. As a consequence, the current stronger-than-expected prices are likely to soften over the medium term.”

The index nationally rose 0.4 per cent from December to an all-time high. It was the largest monthly rise in five months.

The gain from a year earlier exceeded the cross-country average in four of the 11 markets: Vancouver, Calgary, Toronto and Hamilton (5.1 per cent). It was close to the average in Edmonton (4.4 per cent) and Winnipeg (3.9 per cent). It was minimal in Montreal (0.8 per cent) and Quebec City (0.6 per cent). Prices were down from a year earlier in Victoria (5.7 per cent), Halifax (2.9 per cent) and Ottawa-Gatineau (0.6 per cent). The 12-month decline was a first for Ottawa-Gatineau, the 11th straight for Victoria and the fourth in six months for Halifax, said the report.

On a monthly basis, price increases were led by Vancouver (1.1 per cent), Toronto (0.5 per cent) and Quebec City (0.5 per cent) led the composite index. Calgary equalled it. Hamilton prices were up 0.3 per cent, Winnipeg and Montreal prices 0.2 per cent. Edmonton was flat on the month. Prices fell 0.3 per cent in Victoria, 1.1 per cent in Ottawa-Gatineau and 1.7 per cent in Halifax. The January rises in Montreal and Quebec City interrupted runs of five consecutive monthly declines. For Ottawa-Gatineau it was the fifth straight monthly decline, for Victoria the fourth and for Halifax the second. For Vancouver it was a ninth straight monthly rise, for the composite index the 10th in 11 months, said the report.

“There are signs that national house price inflation is close to peaking. The earlier strength in existing home sales, triggered by fears of higher mortgage rates, has begun to fade,” said David Madani, economist with Capital Economics. “January’s preliminary data reported by the regional real estate boards indicate that national home sales declined for a fourth consecutive month.

“The drop back in the months’ supply of inventory is already consistent with annual house price growth rate remaining around 4.0 per cent. If we are correct about home sales drifting lower this year, it will once again start to put downward pressure on house price inflation.”

Booming luxury market pushes Calgary house prices to records

Booming luxury market pushes Calgary house prices to records

Average sale and median prices at unprecedented levels

BY MARIO TONEGUZZI
CALGARY HERALD, JANUARY 2, 2014

CALGARY - A booming luxury market, and tight overall conditions with listings not keeping pace with demand, has pushed Calgary house prices to unprecedented levels.

Average sale and median prices hit all-time records for the city in 2013 for both total MLS transactions and in the single-family home category, according to data released Thursday by the Calgary Real Estate Board.

The average sale price for total MLS reached $456,703 for the year, up 6.54 per cent from 2012, while the single-family average price rose by 7.61 per cent to $517,887.

The median sale price for total MLS was $401,000 and it was $450,000 for single-family homes. The median price rose by 5.53 per cent from the previous year for total MLS and it was a 7.14 per cent hike in the single-family market.

Also, December capped a solid year for the residential real estate market with the highest-ever monthly average sale price at $527,764, eclipsing the previous record of $526,546 set in June 2013.

"Momentum was building from the last quarter of 2012," said Christina Hagerty, a realtor with RE/MAX Realty Professionals in Calgary. "We approached 2013 with low interest rates, one of the lowest unemployment rates in the country and the lowest vacancy rate in the past decade. Employment growth and higher than expected net migration into the city helped support the demand for housing and increased sales and pricing. 2013 was an extremely busy year for us with informed and prepared purchasers.

"People talk about the flood adding to this, but I focus on the amazing ability for a city to rebound in a very short period of time. Something that may have devastated other major centres. I believe that this is largely due to the sense of community and the job market allowing people the ability to rebuild."

The previous records for average sale prices were set in 2012 at $428,649 for total MLS and $481,259 for single-family homes. The previous records for median prices were set in 2007 at $382,000 for total MLS and in both 2007 and 2012 at $420,000 for the single-family market.

Average prices in the city ballooned this year as a result of a strong luxury market that set a record for most transactions ever at $1 million or more.

devastated other major centres. I believe that this is largely due to the sense of community and the job market allowing people the ability to rebuild.”

According to Mike Fotiou, associate broker with First Place Realty, there were 727 luxury home sales in 2013, which was a 33.6 per cent hike from the previous annual peak in 2012. The year was marked by 10 consecutive months of new monthly sales records. Only January and December did not set records in 2013.

Total MLS sales in the city reached 23,489 units in 2013, up 10.78 per cent from the previous year. New listings of 32,153 were up 0.97 per cent but active listings at the end of December were down by 17.80 per cent to 2,235.

"Companies are recruiting professionals across Canada and globally and this has put Calgary on the map as a thriving metropolis of opportunity and a safe place to raise their families," said Hagerty. "With vacancy rates at one per cent and an abundance of job opportunity, there is a confidence in the city. 2014 looks to continue with solid growth fueled by sound fundamentals."

MLS sales and percentage increase from 2012 for different housing categories were: single-family, 16,302, 7.92 per cent; condo apartment, 4,007, 14.45 per cent; condo townhouse, 3,180, 22.40 per cent; and towns, 4,516, 13.81 per cent.

Average sale price and percentage increase from 2012 were: single-family, $517,887, 7.61 per cent; condo apartment, $299,517, 5.17 per cent; condo townhouse, $341,116, 7.73 per cent; and towns, $381,884, 9.55 per cent.

Median price and percentage increase from 2012 were: single-family, $450,000, 7.14 per cent; condo apartment, $261,000, 3.78 per cent; condo townhouse, $306,000, 6.45 per cent; and towns, $355,700, 6.18 per cent.

Scott Bollinger, broker with the ComFree Commonsense Network, said prices in Calgary climbed because of increased sales and listings not keeping pace with the demand.

"Most notably in 2013 we saw rising wages, low interest rates and record in-migration. So it’s not surprising after three to five years of relatively little price growth, and despite the steady employment and the wage growth along with record low interest rates, that prices surged this year," he said.

"Add to that the Alberta and Calgary economies outperformed almost every other region in Canada in 2013 by a wide margin, which had the effect of attracting all of those people. But the interesting thing is that 70 per cent of the net migration to Calgary in particular was international. And the other thing about the migration was that we set a record this year for the growth of the cohort of ages between 25 and 45 and those people, along with the international crowd, are most likely to engage in household formation."

Bollinger said he is surprised that the listings didn’t catch up with the sales. He said the market might expect to see more of a reaction from the listing side early in the new year.

"If we don’t see that increase in listings, I think we’re going to continue to see farily significant price increases," said Bollinger.

In a statement, Ann-Marie Lurie, CREB’s chief economist, said sales growth exceeded expectations in 2013, pushing above long-term trends.

"Two consecutive years of elevated levels of net migration, combined with an improving job outlook and confidence surrounding long-term economic prospects, supported the demand growth," she said.

"In 2014, both sales activity and prices are expected to improve, but not at the same pace recorded this year. While factors influencing demand will support growth in 2014, rising listings and increased competition from the new home sector should alleviate some of the supply pressure in the market."

Those factors, combined with potential increases in long-term lending rates, should take some of the steam off the exceptionally strong price growth recorded in 2013, said Lurie.

A FLOOD OF HOPE

Alberta an economic leader despite devastating floods
Real GDP growth forecast to be best in Canada in 2014
By Mario Toneguzzi

Calgary Herald September 17, 2013

CALGARY — Not even the worst floods in memory will be enough to restrain Alberta’s economy this year, according to the latest RBC Economics Provincial Outlook released Tuesday.

The report said post-flood spending will more than compensate for the drop in economic activity related to the natural disaster as RBC is upwardly revising its provincial real GDP growth rate to 3.2 per cent in 2013, up from the 3.0 per cent previously projected due to the anticipated economic boost from post-flood spending.

It will be the second best growth rate in the country this year behind Newfoundland & Labrador at 6.0 per cent.

And RBC is forecasting Alberta growth of 4.1 per cent in 2014 to lead the nation.

“There is no doubt Alberta’s economy took a hit after the floods, however, the province has shown tremendous resiliency, and we expect the economy to spring forward for the remainder of 2013,” said Craig Wright, senior vice-president and chief economist for RBC. “Post-flood spending will more than make up for the short-lived economic challenges Alberta experienced at the beginning of the summer.”

Ben Brunnen, a Calgary economic consultant, said Alberta is well-poised for growth into 2014.

“Oil and gas revenues are at their highest point since 2008, and industry re-investment is comparable to 2011 when we saw five per cent GDP growth,” he said.

“People have confidence in the Calgary economy. Unemployment is low, the residential real estate market is strong, and we are at the front end of a major commercial construction cycle.”

Adam Legge, president and chief executive of the Calgary Chamber of Commerce, is not as optimistic as the RBC report.

“I think Alberta will do moderate growth next year restrained by lack of market access, continued oil price differentials and a shortage of labour. Flood-related spending does hit GDP but should be viewed as a temporary lift that actually will create reduced GDP impacts in the future.”

RBC said that annual GDP statistics will fully capture the additional spending and work required by the reconstruction, repair and replacement that will take place, but will essentially ignore the destruction of or damage to property.

“Even without this perverse lift that the floods will provide to the provincial economy, Alberta continues to demonstrate substantial and sustained economic momentum,” said Wright.

The report is forecasting 1.8 per cent economic growth for Canada this year followed by 2.8 per cent in 2014.

“In addition to the boost from post-flood spending, we expect Alberta’s economy to benefit from stronger capital investment in oilsands now that earlier ‘bitumen bubble’ concerns have largely receded,” said Wright.

Todd Hirsch, chief economist with ATB Financial, said Alberta’s economy is set to pick up a bit of momentum next year after slowing down slightly in 2013.

“Stronger energy prices than a year ago are largely the reason. However, agriculture has quietly but steadily regained a very strong position in Alberta’s economy,” he said.

“Continued inflow of interprovincial migrants in 2014 should also ensure the housing market remains healthy and balanced.”

Photo By: Marc Shandro

CONDO FORECAST FOR 2014

Calgary condo price and sales growth forecast for 2014
Median price hike best in Canada this year
By Mario Toneguzzi 
Calgary Herald August 28, 2013 

CALGARY — Record growth is not in the foreseeable future of the Canadian condo market, but it is also likely the sector will be able to avoid a major downturn, according to the latest Conference Board of Canada condo report released Wednesday by Genworth Canada.

The Summer 2013 Metropolitan Condo Outlook suggests population growth and employment gains will help maintain demand levels to absorb supply inventory.

Calgary starts will be hampered in the third quarter by the flooding earlier in the year, but as the “youngest” city in the survey, it is expected to enjoy the highest growth in starts and resale volumes in 2014, with price growth at a moderate level of two per cent to 3.5 per cent over the next few years, said the report.

The report forecast the median price for a resale condo apartment in Calgary will rise this year by 2.8 per cent, the highest in Canada, to $251,237 and by another 3.3 per cent in 2014 to $259,640.

However, it is forecasting sales to drop by 11.6 per cent to 3,508 units this year but rebound by 10.2 per cent in 2014 to 3,867 sales.

“Whether it’s first-time homebuyers entering home ownership, empty nesters looking to downsize or professionals seeking a shorter commute, condos appear to remain a popular option for urban Canadians,” said Brian Hurley, chairman and chief executive of Genworth Canada.

The report said economic factors affecting the housing market, such as employment, interest rates and population growth, will only undergo moderate changes. Employment is expected to rise modestly in the medium-term and interest rates are expected to increase gradually, while population expansion and demographics will continue to support demand in regional markets.

“As condo starts near past averages and inventories edge closer to demand, we are seeing the condo market stabilize both in terms of the price of existing units and the volume of new construction,” said Robin Wiebe, senior economist at the Centre for Municipal Studies at the Conference Board of Canada. “Softer prices and positive economic factors continue to make condos an affordable way for Canadians to achieve home ownership.”

The report said condo sales in Calgary had been doing well before the flood, averaging over 3,900 units at an annual rate in the fourth quarter of 2012 and the first quarter of 2013.

“Active apartment listings had tapered off, hovering below 1,000 units in the fourth quarter of last year and the first quarter of 2013,” said the report. Still, for 2012 as a whole, active listings averaged 1,263 units, up 30 per cent from 2011. The flood has presumably damaged at least some actual or potential apartment listings. This will cut active listings in the third quarter by 10 per cent and lead to a 26 per cent decline in listings for all of 2013.

“The lower listings last autumn lifted the sales-to-active-listings ratio slightly above 35 per cent, its highest level since 2009 and likely approaching sellers’ market conditions. The ratio is forecast to stabilize near 34 per cent in the third quarter of 2013 and end the year at 31 per cent. A solidly balanced market featuring a sales-to-active-listings ratio between 33 and 35 per cent is our call for between 2014 and 2017.”

According to the Calgary Real Estate Board, year-to-date until August 27, there have been 2,767 MLS condo apartment sales in the city, up 14.20 per cent from a year ago. The median price has risen by 3.60 per cent to $259,000 while the average sale price has increased by 7.01 per cent to $297,954.