Supply vs Demand
One issue facing Calgary’s housing and rental market is the fact that in the current environment, demand far outstrips supply. It is not unusual for a single property, even in an “undesirable” location, to attract multiple bids at, or even sometimes above, listing price. This can be attributed to the high median income that Calgarians enjoy ($93k single family income in 2011), as well as the city having a highly attractive job market for almost all work sectors.
The direct result is a market where competition is high. Looking directly at property purchase for new and previously owned real estate, Calgary has seen an average of 13% more sales in the first three months of 2014, compared to the same time period in 2013. This, despite a drop in active real estate listings of an average of 5% for the same time periods.
The Shift to Small Property Ownership & Rental
Condominiums are the current “sweet spot” in the market, both for the investor and the prospective owner. Availability is high compared to single detached housing, while prices are relatively low for the market (2014 average: $325k). In fact, first quarter 2014 condominium sales are 25% higher than first quarter 2013 sales, and account for nearly 20% of all new property sales in first quarter 2014.
This trend towards small property ownership is vitally important for the real estate investor. While there is still high demand for rental properties in the single detached residence space, the low vacancy rates in Calgary mean that many will “settle for less.” This is reflected in the average listing time for a small property rental being around the 13-17 day range, while a full house rental lists for an average 20-25 days.
Another advantage to small property ownership or rental is that much of the upkeep is offloaded to the ownership board for that property. Most, if not all, condominium boards in Calgary have bespoke contracts with third parties for landscape maintenance, snow removal, exterior maintenance, etc, covered by a “condo fee.” For the investor, including that fee into the price of rental presents the consumer with a single number, which is much easier to digest in a high pressure, time sensitive rental market.
Putting It All Together For The Investor
With low supply, high demand, and a willing consumer base, Calgary’s housing and rental market shows no sign of slowing down. This can be attributed to zoning restrictions and the “anti-sprawl” initiative put forth by Calgary City Council that has kept market availability below market demand. This has led to a shift from outwards to upwards, as demonstrated by the sharp rise in apartment complexes and condominium buildings in the past five years.
For the investor, this means that while the buy-in may currently be steep, the possibilities of a positive return on investment are high. Calgary’s economy is very strong, and continues to attract migrant workers from across Canada and beyond. With a population expected to crest 1.1 million residents in 2015, and 1.4 million residents including the metropolitan area by 2016, the simple fact is that Calgary is a booming market for real estate investment. Putting it all together, a strong sellers’ market, a willing population of buyers or renters ready to spend, and no sign of any of it slowing down, Calgary is the current prime market in Western Canada for development and investment.