Calgary is one of the largest metropolitan areas in Alberta, with an economy that is largely based on the oil and gas industry. It also boasts the best housing market in terms of home-sales and prices in all of Canada. Investors, potential new home buyers and existing home buyers alike have their eye on the housing market in the Calgary area to determine if now is the right time to buy, sell or hold real estate. Trends in the Calgary area in particular-including a low unemployment rate, a high demand for residential housing, and rising home prices-forecast a promising housing market for 2013 and beyond.
Mortgage Interest Rates
Canadian mortgage rates have fluctuated over the course of the last few decades, reaching their peak between the mid-1980s and the mid-1990s. During this time frame, the 25-year mortgage rate was in the double digits, but by December 2000, the average Canadian mortgage rate had dropped to 7.81 per cent on average. A further decline was seen in December of 2007 at 6.75 per cent, and as of December 2012, this rate was 4.15 per cent. With lower mortgage rates, it is more affordable for homebuyers to purchase a home; it also leads to an increasing number of refinances among existing homeowners as they take advantage of the lower mortgage rates available.
The State of the Economy
Alberta's economy has been relatively strong in recent years in comparison to other areas of Canada, thanks in large part to the province's economic ties to the booming oil and gas industry. As a result, it is anticipated that economic growth in late 2013 and early 2014 will further boost the local economy in Calgary.. Gross domestic product (GDP) growth in the province as a whole is also expected to increase by 2.3 per cent in 2013 and by 2.9 per cent in 2014. The Calgary Economic Region GDP is expected to grow at an even higher rate of 3.8 per cent in 2015. Employment in Alberta is also expected to rise to 1.7 per cent for 2013 and by an additional 1.8 per cent for 2014. The unemployment rate in the local area is already relatively low compared to other areas of Canada, and is expected to remain close to 4.6 per cent in the coming year. Furthermore, the population is expected to increase by over 105,000 by the end of 2014, and higher rates of consumer spending and wages are anticipated.
Calgary's housing market has previously experienced improvements when the city's economy prospers. In 2006-2007, for example, a spike in employment was accompanied by a spike in home prices. As the region's economy continues to improve into 2013 and beyond, trends like population growth, and lower unemployment rates may make for a thriving housing market.
Availability of New Multi-Family Units & New Housing Starts
In 2009, the number of new multi-family units on the market in Alberta was relatively low, at just 5,954. However, this number has increased sharply in the years following. In 2012, there were 15,903 new units on the market. The future shows even more promising growth, with 14,300 new units expected in 2013, and a projected 14,600 new units in 2014. Newly available multi-family units may create a more competitive environment for both the new and existing homes on the market.
At the close of 2012 in Calgary, total housing starts were up 66 per cent, with multi-family starts in particular expected to reach 6,700 units in 2013. Similarly, the construction of "semi-detached and row units" also increased in 2012 and may prompt an increase in the sales of multi-family units. A total of five 133 apartment units were under construction at the close of 2012, which may also contribute to the growth of multi-family unit sales. This cal likely be partially attributed to the ultra-competitive Alberta mortage market.
Existing Home Sales
According to the Canada Mortgage and Housing Corporation, existing home sales in Calgary were up 20 per cent in 2011 from 16,107 units to 19,302 units. Thanks to increasing migration to the area, a growing population has strained the rental market-and with higher rental prices and lower apartment vacancies, the demand for homes has started to rise. . As a result, existing home sales are expected to continue to improve throughout 2013. This demand however, will also drive the average home price up.
Higher Home Prices Expected for 2013
Across the province, the average home price for a resale is anticipated to be $371,200 in 2013 and $380,700 for 2014. This represents a relatively balanced market for the upcoming years. Furthermore, because the increase in housing prices is expected to remain under three per cent for the next year or two, this is in line with the rate of inflation.
In Calgary, the rise in home prices was higher than average compared with the rest of Alberta. Here, the average home price for 2013 is expected to be approximately $422,000. This average price is an increase of 3 per cent from 2012. The Canada Mortgage and Housing Corporation states that this sharp rise in prices may be due to the demographics of the Calgary area in particular, where those employed in the large energy-industry are able to afford luxury homes.
New data for 2013 is supporting this claim. According to the Edmonton Journal, the luxury home market in Calgary has been promising, posting a 34 per cent increase in sales in 2013. Calgary had 10 consecutive months of new monthly records in 2013 with the exceptions of January and December.
Housing demand is expected to increase in 2013 and 2014. The strong employment rate and rising wages in the Calgary area will be coupled with continued lower interest rates and stable housing prices. Some demand will stem from recent migrants to the area, and others may be first-time homebuyers and those interested in moving into a new home to take advantage of low interest rates. However, some of this demand may be countered by the availability of new multi-family units on the market.
Sales of single-family homes in Calgary reached a new high of $452,900 in April of 2013. In an interview with The Calgary Herald, Calgary Real Estate Broad president Becky Walters said of Calgary's housing growth following this news, "it's really encouraging to see that the Calgary market remains strong. It's reassuring to both buyers and sellers to see that this area is outperforming many parts of the country."
The Future of the Calgary Market: What Does This Mean for Potential Buyers?
Whether buying, selling or investing in real estate, timing the market can be difficult to do. Market trends can provide a sound analysis, and these factors can help to project what is likely to occur. However, fluctuations in provincial, national and international markets alike can have a significant impact on the local economy. Market conditions at the present time are ideal for a purchase, sale or investment due to the current demand and interest rates. While these conditions are anticipated to remain relatively balanced in the next year, there is some degree of risk associated with waiting and trying to time the market.
Housing market trends in Calgary and across Alberta are indicative of a thriving economy with future growth and expansion expected. This growth is expected to be moderate, and most factors are anticipated to remain in check. This is great news for those who are planning to buy, sell or invest in Calgary real estate in the coming months. You can compare Calgary mortgage rates online at Kanetix.