Home Price Gains in Calgary Slower Than in Other Cities

Calgary Skyline by Rich Moffitt
Calgary Skyline by Rich Moffitt

Although the Calgary real estate market offers one of the best conditions for investments, it has been unable to retain any major spike in resales last year. According to the Royal Bank of Canada’s (RBC) housing trends and affordability research for March 2012, Calgary home resales remained mostly flat for the rest of the last year. There was a minor decline in the last quarter.

This behaviour is very unusual for such a strong market, and Calgary surely is among the healthiest in Canada. Over 31,000 new jobs were created in 2011, which represents a 4.4 per cent increase. According to RBC:

The housing affordability was the best it has been in the last six years. In the fourth quarter, the RBC affordability measures fell for all housing categories, with declines ranging between 0.2 and 0.7 percentage points, to levels
well below long-run averages for the most part.

Vancouver and Toronto Markets

The Vancouver and Toronto markets are currently overheating. There is great concern about the situation with these two housing markets since nobody’s really sure what development to expect there. Calgary is luckily out of all this intense struggle on highly competitive markets. The slow and stabilized market should probably be considered an advantage in a situation like this.

There is a large disconnect between fundamentals (incomes, rents, house prices) and resale prices on the Vancouver market. Rents, for example, increase more slowly than resale prices. According to Ben Rabidoux from The Globe and Mail, this can be a symptom of abundant and cheap credit driving prices to irrational levels.

The Toronto property market show signs of unhealthy development as well. The situation between fundamentals and resale prices is the same as in Vancouver. The problem might be the potential inventory in the pipeline at a time when existing inventory is quite high. The condo research firm Urbanation recently noted:

There were 15,554 unsold Toronto condo units at the end of March, an increase of 27 per cent annually. They further estimated that if current trends persist, that number could approach the all-time high later this year.


Calgary by Angela MacIsaa
Calgary by Angela MacIsaa

The Teranet-National Bank House Price Index released on April 25th showed that prices in Calgary dropped by 0.6 per cent from January. In the past year, prices in Calgary rose by 1.3 per cent while they went up 6.1 per cent nationally. This shows how Toronto and Vancouver are deflecting the stats. This was the third month in a row of deceleration in the 12-month inflation in Canada.

Mark Marc Pinsonneault from the National Bank commented on the situation of the Calgary real estate market:

Overall, the Canadian market is nevertheless balanced. One might notice that the number of sales was above 40,000 in March. But this resulted from a sudden increase concentrated in Ontario and Alberta. Also, a rise to this level in last December proved to be a one-month spike. Finally, March sales could have been spurred by special mortgage rate offers. So it is premature to conclude that the activity is set to return to pre-recession or post-recession peaks. Indeed, we still think that the market is in a consolidation phase.
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