The Calgary real estate market has enjoyed a relatively balanced housing market, with affordability being one of its key attractors as a major urban centre. But could conditions be shifting over the next several months?
While the rest of the country have been experiencing a boom in sales activity and prices since the early days of the pandemic, Calgary and the broader Alberta real estate market continued to lay low, mainly due to the crash in crude oil prices and the economic downturn. Today, this Western Canada city is witnessing renewed growth resulting in a shortage of supply and in turn, rising prices.
Housing inventory has quickly become a critical issue in the Calgary real estate market, as Albertans and outsiders alike try to buy up residential properties, which are still relatively well-prices when compared with some other places in the Canadian real estate market. Will tight conditions continue, or is relief on the way?
Calgary Real Estate Update: Supply Down 35% From Last Year
Housing supply is exceptionally low in the Calgary real estate market, according to the latest data from the Calgary Real Estate Board (CREB).
CREB figures show that active residential listings tumbled at an annualized rate of 20.4 per cent, totalling 3,600 units in February. This is the lowest level since 2006.
New listings did pick up some steam, surging 63.2 per cent year-over-year to 4,652 units, which is still historically low for this time of the year.
The monthly report confirmed that the months of inventory, which measures the number of months it would take to exhaust current stock at the present rate of sales, declined to 1.09 months. The numbers show that listings have remained critically low among detached, semi-detached and row homes – but what’s available is being scooped up, fast. Residential sales advanced at an annualized pace of 80.5 per cent, with 3,305 units exchanging hands in February.
This high demand for limited supply has driven up the price of Calgary real estate. The average residential sale price climbed 16.1 per cent year-over-year to $499,400. All property types recorded gains in February:
- Detached: +18.9% to $596,400
- Semi-Detached: +15.8% to $461,400
- Row: +13.2% to $321,100
- Apartment: +4.6% to $257,500
“Sales have been somewhat restricted by the lack of supply choice in the market. While sellers did respond with a record level of new listings this month, the demand has been so strong that the housing market continues to remain undersupplied, causing further price gains,” said CREB® Chief Economist Ann-Marie Lurie in a news release.
“We did see more listings this month, but it did little to change the market balance or take any pressure off prices. This was expected, as these conditions should persist for several more months.”
New housing construction eased at the start of 2022. According to Canada Mortgage and Housing Corporation (CMHC), housing starts declined 50 per cent to 561 units in January compared to the same time a year ago.
Will Higher Interest Rates Cool Down Growth?
Although conditions are incredibly tight in the Canadian real estate market, some market analysts believe that higher interest rates will slow down this remarkable price growth of the last two years.
The Bank of Canada (BoC) raise its benchmark rate for the first time since 2018, pulling the trigger on a 25-basis-point hike to 0.5 per cent. Despite the increase, interest rates are still quite accommodative, leaving some financial experts to purport that the red-hot housing market in a place such as Calgary could continue to sizzle moving forward.
Borrowing costs will rise, but the broader effects on housing sales and valuations will not have much of an impact, says Rob Roach, the deputy chief economist with ATB Financial.
“If you’re looking for a home and you need to move, you’re still going to do it if you can, so you’ll bite the bullet, but it will have a dampening effect because you can only stretch your dollar so far,” Roach said in a statement. “It might even make some of those lower-priced properties even more appealing, but there’s only so much this interest hike can do to slow what’s already a super-hot housing market.”
Indeed, 2022 housing forecasts anticipate that prices will continue to record growth throughout the Canadian housing market, including Alberta. Does this mean that Calgary real estate could be on the precipice of its own housing affordability crisis in the coming years? If rates do not cool down and not enough supply is coming to the market, this could be the case.