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Top Investor Edition: Calgary Is Canada’s Bull Market Heading Into 2023

by Neil Sharma on 31 Oct 2022

Real estate markets across Canada are feeling the full thrust of rising interest rates and a contracting economy, but somebody evidently forgot to tell Calgarians because their city’s market is white-hot.

Having come out the other side of a recession about a year ago that was induced by the oil and gas sector’s collapse in 2014, home prices are still below the national average, whether in the single-family detached or condominium segments of the market. Such an auspicious reality has even impelled the municipal government to target denizens of cities hampered by housing affordability woes, as well as a burgeoning cost of living crisis, through what is proving a successful advertising campaign. 

Indeed, ‘Alberta is Calling’ and exasperated urbanites are taking heed.

Natasha Phipps, founder of the Phipps Real Estate Group at CIR Realty in Calgary, and a renowned local expert is at the forefront of the city’s housing rush and has helped clients, both in the province and Canada-wide, find investment properties with propitious short- and long-term horizons. She says that the city’s advertising campaign has been a resounding success because while, say, an investment property in Toronto can be sure to yield a lofty payout, in the long run, its cash flows negatively in the near term. Such is not the case in Calgary, where investment properties' cash flow is positive in the short term while ensuring promising long-term appreciation.

“We’re not seeing dropping property values here,” Phipps told CREW. “At the beginning of the pandemic, we were in a recession for several years, so starting prices were lower than in the rest of the country, and it kept us insulated.”

According to the latest statistics from the Calgary Real Estate Board, sales declined by 11.9% year-over-year in September, but the benchmark price of a home in the city still rose by 10.7% to $527,400 during the same period, and by 6% since the beginning of 2022.

Although well below the national home price average of $637,373, as revealed by the Canadian Real Estate Association during its last market update, purchasers of Calgary real estate, whether they’re city residents or from outside Alberta, are pivoting towards more affordable options. Phipps says there’s no shortage of those in the city.

“Townhomes are a great entry point for people new to Calgary or for first-time investors who don’t have the budget to fit into detached homes or the multi-unit sector,” she said. “They can get into a townhouse here in Calgary for well under $400,000—they average $360,000, which is an appealing starting point for newcomers or investors. There can be found in very attractive suburban neighbourhoods.”

Phipps added that the rental rates commanded by landlords in the city have steadily ameliorated in recent years to the point that a two-storey, three-bedroom house can pull in $2,300 a month. A year ago, a three-bedroom would have earned around $1,800 in monthly rental income.

However, no segment of Calgary’s real estate market is hotter suddenly than condominiums, for which sales surge by a whopping 60% year-over-year in September, reaching 5,026 transactions. As a result, new listings are nowhere near where they need to be to replenish the cupboards with enough supply to meet demand. With only 2.8 months of inventory, sellers have the leverage in condo sale negotiations for the first time since the recession.

But despite rising prices and interest rates, condos remain the most affordable option for buyers, and investors are cashing in, irrespective of short-, mid-, or long-term tenancies. This hasn’t always been the case—in fact, until recently, investors sagaciously avoided the city’s condo stock, but considering the market is early in its bull cycle, there’s no better time to invest than the present, says Phipps.

“For the first time in many years, I’m feeling comfortable suggesting the downtown market to investors,” she said. “You can buy a condo for well under $300,000 and attract a triple-A tenant in a very nice area.”

Calgary has emerged as a unique market in contrast to the rest of Canada, as buyers have, by and large, shrugged off trepidation about rising interest rates and inflationary consumer goods prices. Other local fortuitous policies, like a dearth of residential rent controls and a friendly corporate structure, are conjuring, albeit cautiously, memories of the city’s recent boom years.

“In Alberta, we can adapt to whatever a changing market bears and that is a very popular reason people are looking to Alberta,” Phipps said. “People are looking to Alberta to outrun inflation and rising interest rates; they’re seeking affordability and opportunity here.”   
 



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