The Bank of Canada raised its overnight lending rate by yet another 50 basis points a couple of weeks ago, bringing it to 3.75% and pouring more cold water on the once-scorching housing market.
But all things being unequal, Albertans are faring much better than the rest of their homebuying compatriots.
According to Mark Verzyl, a realtor and investment expert at eXp Realty, which is part of the Greater YYC Group, Calgary’s residential real estate market is poised to continue its balanced ways, and while prices are indeed increasing, the pace of growth isn’t enough to make buyers chary, as evidenced by condo sales surging by over 27% from a year ago. Verzyl says affordability is the name of the game, and because Calgary’s home prices have spades, a rising interest rate environment hasn’t ground activity to a halt like it has in the rest of Canada.
“When the rate hikes started, Ontario cratered fast,” Verzyl said. “It went down very, very quickly, and for us, we were doing incredible business; it was historic, but it needed to slow down a bit, and it did, which was good. Seeing prices go up is good, however, you don’t want them off the charts for too long, otherwise, you’ll feel pain later, which we have experienced in this city, and that’s why our prices are so low compared to other major markets in Canada.”
Verzyl is referring to the oil and gas plummet of 2014, which haunted Calgary for years after the fact, and while the city is enjoying a revival, the Bank of Canada’s decision to keep increasing its overnight lending rate might have curtailed a repeat of years past when economic headwinds tanked the housing market.
However, market fundamentals, the most salient of which is surging immigration to Canada, have ameliorated dramatically in the last few years. Verzyl noted that the average number of annual newcomers has grown from 280,000 a few years ago to 415,000 through the next few years, and as he says, everyone needs a place to live.
“Calgary is on the map with Toronto and Vancouver, of course, because it’s half the price of those cities. In fact, taxes in Calgary are less, as are the living expenses. You get to keep more of your money,” he said. “Migration to Calgary is very, very heavy right now, and going forward it is predicted that Alberta’s GDP will be topping Canada over the next three or four years. Ontario and B.C. may experience a full-on recession, but Alberta will only get sideswiped by one.”
Indeed, a forestalled recession will entice even more newcomers to choose Calgary as their adopted home instead of perpetuating the decades-long trend of settling in Toronto, and that’s auspicious news for the city’s real estate investors. Among the casualties of the economic crash in the city nearly a decade ago was the condo market, but while a glut of inventory sat desperately on the market for years, today there’s a voracious demand for vertical living, in part, because of a shift towards affordability in the city.
In fact, even Torontonians are choosing Calgary over Toronto.
“Why would you live in a $600,000-700,000 one-bedroom in Toronto or Vancouver when you can come to Calgary and get a rental for half to two-thirds of what you’d pay on a mortgage in those cities, or you can even buy a house instead of an apartment,” Verzyl said. “Everyone who comes out here from Toronto says they had no idea how great it was.”
Even the provincial capital is demonstrating many of the same propitious signs that have renewed domestic and international interest in Calgary.
“There is typically always a bit of a difference in price, which is something from $30,000-40,000, between Calgary and Edmonton, although the gap is a little wider right now, Edmonton is a fairly stable market. You have an armed forces base, and because it’s the capital, there are lots of government jobs, plus a pretty big workforce in the oil fields in Fort McMurray. While Calgary leans more towards head offices and white collar jobs, Edmonton is still doing well.”
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