Price Trends by James Fowler
If there’s a fiscal cliff looming in Alberta’s real estate market, chances are the industry will be climbing that economic escarpment ─ and not falling off its edge.
Market signals have indicated that the Calgary real estate picture is an optimistic one, with market prices on stream to rival the $423,950 average price plateau set in 2007, before the bear market lacerated the U.S. real estate bubble, resulting in the greatest housing crash in the country’s history. Canada fared better, while Calgary in particular was one of the most fortunate municipalities although average annual prices dipped below the $400,000 mark in 2009.
“Calgary’s housing market has finally started to recover,” said Ann-Marie Lurie, chief economist at the Calgary Real Estate Board in the organization’s December 2012 newsletter. “While prices remain shy of the highs recorded in 2007, this is a move in the right direction.”
The recovery is good news for consumers who purchased housing before the crash who may be able to recover investments lost in the downturn over the past five years, if the price rises remain steady. The surge has also sparked speculation of another real estate boom as evidenced by the 27,212 unit sales in 2012, nearly 5,000 more than the previous year and eclipsing the 26,671 mark set in 2007. A robust energy sector, increased job prospects being met by an influx of immigrants into the city have bolstered consumer confidence while low interest rates have decreased the risk in investing in property.
But, a combination of these positive economic indicators combined with low housing inventory have not only driven prices up, but have rapidly cut down the number of days a listing is for sale. One realtor who listed a home in the Mount Pleasant neighbourhood last summer experienced 14 showing and nine offers which resulted in a sale of $30,000 higher than the original listing price in less than a day.
“Consumers in the market were looking for value and, if a home was priced right based on a longer term view of their needs, they were buying,” said Bob Jablonsky, president of the Calgary Real Estate Board about the trend in the CREB newsletter.
In the wake of the housing crash and to stave off additional mounting debt by Canadian consumers the government toughened mortgage lending rules by cutting down the amortization period from 30 to 25 years. It also cut down the percentage of equity a consumer can borrow against a home’s value from 85 to 80 per cent. What hasn’t changed is the minimum down payment of five per cent of a home’s value. So far, these regulatory changes haven’t played much of a factor in Calgary although the Globe and Mail reported its impact on housing purchases to be higher in cities like Toronto and Vancouver. Considering the 2012 average price of $497,298 for a Toronto home and $590,800 for a Vancouver dwelling, one additional factor in Calgary’s favour is that homes in the Alberta city are still relatively much more affordable.