HIGH IN THE SKY APPLE PIE

Calgary condo market booming with high sales growth

New condo sales at strongest levels since 2006

BY MARIO TONEGUZZI

CALGARY HERALD OCTOBER 11, 2013

CALGARY — The pace of year-over-year sales growth in the resale condo market is much higher than the single-family home market this year in Calgary.

And new condo sales are also moving in an upward trend towards the strongest levels since 2006.

“Calgary’s condominium market remains resilient and in high demand with new construction being well supported demographically, exhibiting steady sales throughout the inner city and the downtown core,” said Kaitlyn Gottlieb, a realtor with Century 21 Bamber Realty Ltd. in Calgary.

“Calgary’s luxury condominium market remains immensely sought after. As Calgarians’ incomes continue to rise and our business sector attracts relocations, high-end buyers are taking advantage of the luxury condos that Calgary has to offer, boasting high-end finishes and their close proximity to the downtown core.”

According to the Calgary Real Estate Board, year-to-date until October 10, MLS sales in the condo apartment category in the city were 3,253, up 14.58 per cent from the same period a year ago and the average sale price has jumped by 6.14 per cent to $298,050. In the condo townhouse category, sales of 2,600 are up 22.18 per cent from last year and the average sale price has risen by 6.60 per cent to $338,809.

The single-family home market in the city has seen sales rise by 7.36 per cent to 13,482 with the average price moving up by 8.18 per cent to $517,730.

“While the recent floods have undoubtedly impacted all sectors of Calgary’s housing market inclusive of the condominium market, as demonstrated by the increased demand for affordable housing, the overall market remains stable,” said Gottlieb.

“Steady migration, employment and population growth are major contributors as we move into the fourth quarter of the year. The relative affordability of our city’s housing market remains one of the best in Canada and we can expect to see Calgary’s condominium market continue to rise at a moderate, sustainable pace.”

A report by Altus Group says new condo sales in Calgary are at the strongest levels since 2006.

It said the new multi-family condo market has seen impressive sales in the first half of 2013 with almost 3,000 sales to start the year, an increase of 400 sales compared with the same period in 2012.

The sales pace this year is 16 per cent ahead of 2012 at mid-year and 74 per cent better than in 2011 for the same period.

“New suburban apartment and townhouse projects entering the market are primarily responsible for the strong sales results, with mid-year sales up sharply in the north and south quadrants of the city following the launch of several new projects during the Spring,” said the report. “In the downtown region, sales are generally consistent with last year’s pace, although sales activity has been more focused at projects with superior locations and faster possession timing.”

The report said the strong sales so far this year are expected to push the annual sales volume to about 5,000 units, potentially making 2013 the second strongest sales year in the past decade.

“Developers will begin to see cost pressures from higher land prices, construction cost escalations and a declining land supply in the suburban regions, while consumer activity could be impacted by the recent price growth, higher interest rates and more restrictive lending practices,” said the report.

“While home ownership will remain the goal for most consumers, the higher prices and interest rates may force some consumers to delay their purchase decision while they save for a larger down payment.”

A FRENZIED PACE!

Calgary office leasing activity a sign of prosperity
Employment growth expected to follow
By Mario Toneguzzi
Calgary Herald October 27, 2011

CALGARY — It is a symbol of both current and future prosperity.

And judging by the record, frenzied pace of leasing activity in the downtown office market, Calgary’s economic fortunes appear to be looking good right now - and down the road.

The leasing activity is sure to lead to future employment growth.

“Companies don’t snap up office space just to lounge in it — if energy companies are expanding their office footprint, they plan on growing their business. This means more drilling, more investment, more jobs and more economic growth for Alberta moving forward,” said Dan Sumner, economist with ATB Financial in Calgary.

Greg Kwong, executive vice-president and regional managing director of CB Richard Ellis Ltd., who moderated a panel discussion on the topic Wednesday at the Calgary Real Estate Forum, said so far this year absorption in the downtown market is 2.2 million square feet.

“To put it into perspective, the average over the last 15 years has been about 750,000 square feet annually. So unbelievable in that respect,” said Kwong. “Why is it happening? Probably two factors. One is if you talk to the oil and gas companies and energy-related services companies that are taking space ... they’re banking space again.

“The second factor is that there was an unusual amount of lease renewals that came up for expiry in the last couple of years and they took advantage of what was deemed to be a slower market.”

Kwong said the difference in the oil and gas industry between today and 30 years ago is that capital budgest and decisions involve billions of dollars being laid out over 10, 15 or 20 years.

Todd Throndson, managing director of Avison Young in Calgary, said many companies are making plans for the long term.

“They want to protect themselves for projects that they may have in six months, in 18 months, in 24 months. Down the road, they’re thinking big picture,” he said. “A lot of companies back in 2006 and 2007 were put in very compromising positions because of their real estate needs. They weren’t able to get the space they wanted. They had to pay a lot more money for the space than what would have been ideal.

“So a lot of them with strong balance sheets are making sure they protect themselves and get their space for their corporate needs going into the future.”

That’s reflected in the downtown office vacancy rate. According to Avison Young, it’s reached its lowest level since early 2009. Over the last three months, downtown office vacancy has dropped from 7.4 per cent to 6.2 per cent.

The addition of skycrapers Eighth Avenue Place and the Bow have not spiked the vacancy rate as was feared a couple of years ago. And demand is fuelling talk of more new development on the horizon.

Bryan Slauko, managing director of Base 10 Capital Advisors, said the amount of absorption implies significant growth in the number of office jobs in Calgary that would be needed to fill those seats. And filling all those seats requires new employees which would mean population growth in Calgary. But population growth can’t match that level of employment growth.

“It begs the question: if there’s not a ton of new office employment currently compared to the historical level to absorb all that office space then in my opinion it seems to mean . . . it’s for speculative growth. They’re planning on growing into that space in the future if the economy holds up and their hiring plans continue,” said Slauko.

“But that comes with a fair amount of risk to the office market because we see today in the economy there’s a lot of global economic uncertainty and I don’t believe Canada is immune and Alberta’s not immune because there’s a lot of risk to the natural resource prices that we depend on.”

And if the economy heads south then potentially a lot of office space will be coming back onto the market for lease.

EMPLOYMENT SIGNS

Canada gains 24,700 jobs in May; unemployment rate remains at 8.1%
Paul Vieira, Financial Post · Thursday, Jun. 3, 2010

OTTAWA -- The Canadian job market continued to churn out jobs in May, adding 24,700 workers -- mostly full-time and in the private-sector -- to payrolls, Statistics Canada reported on Friday.


The May data were well above Bay Street expectations for a 15,000 gain, and has some analysts suggesting this represents more evidence interest rates in Canada will continue to head upward.

“This should up the ante on further Bank of Canada hikes,” said Derek Holt, vice-president of economics at Scotia Capital. “This is simply an astounding jobs report.”

In contrast, the U.S. jobs data for May came in well below expectations, with 411,000 people added to payrolls versus an anticipated 533,000 gain. Particularly disappointing was that gains in private-sector employment, of 41,000, were little changed from the prior month. The anticipation was that the private sector would add 190,000 jobs. As a result, most of the U.S. job gains were temporary hires by the U.S. government to help conduct that country’s census.

John Lonski, chief economist at Moody’s Investors Service, said the U.S. data were “disappointing,” and would mean the U.S. Federal Reserve would be in no hurry to raise its benchmark rate for the foreseeable future. “This tells us the recovery in the U.S. labour market is happening at a snail’s pace.”

The Bank of Canada this week raised its key interest rate for the first time in nearly three years, to 0.50% from 0.25%, as strong domestic fundamentals outweighed worries in Europe. However, its cautious rate statement, which emphasized the risks in Europe, had some analysts questioning whether the central bank would hike rates at its next meeting in mid-July.

The gain of 24,700 jobs comes on the heels of a record performance in April, in which 108,700 people were added to payrolls. The unemployment rate remained unchanged in May at 8.1%, as more people entered the labour market in search of jobs.

The headline May number is smaller than April’s whopping performance, but analysts were nonetheless impressed with underlying data that suggest the recovery has legs.

Full-time employment rose by 67,000 in May, while part-time positions fell by 43,000. The private sector accounted for 43,000 new positions during the month, while there were 28,000 fewer self-employed workers, the agency said.

“Those part time jobs that were taken in lieu of more suitable employment are giving way to more suitable full time jobs,” said Stewart Hall, economist at HSBC Securities Canada. “So too may it be the case that part time jobs have evolved into full time positions as companies respond to increased economic activity.”

The strongest job gains were in transportation and warehousing, and health care and social assistance. Public administration and agriculture were also higher. The biggest declines were in the information, culture and recreation sectors, as well as in the accommodation and food services, and natural resources industries.

Ontario, Alberta, and Newfoundland and Labrador recorded the most robust jobs gains. Meanwhile, average hourly wages rose 2.4% in May, in line with gains in the same month a year earlier.

Employment has risen by 215,200 over the past five months. So far this year, the labour force increased by 166,000 and the participation rate, which fell by close to one percentage point during the recession, has risen 0.3% from its recent low.

“The latest employment data confirm a relatively strong domestic economic recovery that has begun to mature – where incremental gains diminish while becoming self-sustaining,” said Pascal Gauthier, senior economist at Toronto-Dominion Bank.

Yanick Desnoyers, assistant chief economist at National Bank Financial, said that based on statistics from the first two months of the second quarter, total hours worked jumped “notably” to 4.6% annualized, the strongest showing in three years. Meanwhile, wages are up a robust 6.4% annualized, the best showing since the third quarter of 2007.

“Since both labour input and the wage bill are accelerating, it is hard to argue for a slowdown in domestic demand in Canada anytime soon,” he said. “As the Bank of Canada stated [this week], there is still considerable monetary stimulus in place this side of the border.”