I guess I will start off by saying – we mostly had winners here in Calgary in 2023!
While other markets in Canada saw price declines and sluggish market activity, Calgary and its surrounding towns saw remarkable resiliency in the face of massive mortgage interest rate increases.
Many homeowners that renewed their mortgage this year or are renewing in 2024 are seeing payment increases in the several hundreds of dollars (if not $1,000+) per month. As much as the mortgage stress test was an adjustment for consumers back in 2016 when it was introduced, it has likely helped Canadian households to weather this interest rate storm.
We are still seeing low rates of foreclosures in Alberta. Those homeowners that are really strapped and need to get out can sell their home for more than they paid for it because of the strong price increases we have experienced over the past three years.
One big storyline in 2023 was the increased demand for lower priced homes. If homeowners decided to downsize because their mortgage renewal was too high, they would have added to that demand.
So home sellers in general were winners in 2023 with benchmark prices rising between 12% and 20% depending on your property type. Interestingly, detached and semi-detached homes saw the LOWEST increases while townhomes and condos saw the HIGHEST increases!
Unlike most real estate booms in Calgary’s history, this one is not being driven by oil and gas. Buyers are flocking to our province to find a better quality of life with more affordable housing. Due to the increase in remote work and our economy finally starting to diversify, those new Albertans are not necessarily working in the oil and gas sector. They may be working for the same company they worked for in BC or ON but in a remote capacity or they may be working in our tech or health care industries. Some are retired and simply want to enjoy more spending money each month and having access to the beautiful Rocky Mountains.
One of the biggest winners this year was condo owners. For years, the Calgary condo market has struggled with low demand and low prices. Many condos were worth 10%-20% less than what people paid for them… for years. In addition, rental rates were very low, so even when owners were willing to hang onto their condos as a rental property, they were renting at a loss each month.
The previous peak pricing for condos was in mid-2014. Overall condo prices dropped a full 21% to their lowest number, which was in mid-2020. Even when detached prices started to rise in 2020, condo prices were still falling because so few people were working downtown and everyone wanted more space (both indoor and outdoor) during lockdowns. 2021 was a fairly flat year for condo prices but then in 2022, we started to see this market come back to life. In 2023 alone, prices rose 19% and they are now overall 36% above that 2020 low!
Townhomes saw an even more dramatic shift and are sitting at 48% above their 2020 low! Urban planners like to talk about the ‘missing middle’ which is a housing type that is not a shoebox condo but not as big or expensive as a single family home. As the name suggests, there is not a lot of this property type around! Zoning changes over the past decade in Calgary have allowed for more redevelopment in the inner city that would allow townhomes so we are seeing more of this product type, but those new builds do tend to be on the high end of the townhome price range, helping to influence townhome prices up in general.
To understand how little inventory there is in this property type, I like to look at the ‘months of supply’ number. Another way to understand it is: if no new listings hit the market, how long would it take to fully sell out of all the current listings at the current rate of sales? When we see a market that has between three and four months of inventory, we consider this a balanced market. Below three months is a seller’s market. The townhome category had 7 out of 12 months of 2023 with LESS THAN ONE month of supply! This is basically unheard of!
The condo, semi-detached and detached markets had between one and two months of supply all year, with the exception of January. So it was a low inventory across the board but the townhomes really took the cake on that statistic.
To put this in perspective, there were five full calendar years (2016-2020) where the condo segment NEVER dipped below five months of supply. So if your neighbourhood was having 10 condo sales per month, that meant there were at least 50 listings. And there were many months where that number was 7, 8 or 9 months of supply.
During those five years, there were less than 3,000 condo sales per year in Calgary. That number increased dramatically in the last three years with 4,142 sales in 2021, 6,220 sales in 2022 and a whopping 7,884 sales in 2023, the highest ever!
In contrast, the detached house market in Calgary actually saw an opposite trend with a huge 17,037 sales in 2021, 15,786 sales in 2022 and 12,722 sales in 2023. The reason for the reverse trend is that so many buyers have been priced out of the detached house market. The benchmark detached house is nearly $700,000 whereas the benchmark condo is about $320,000, less than half the price.
When you narrow in on some smaller statistical groups, you see this same storyline emerge with lower priced product showing the most strength in 2023.
For example, condo prices which went up 19% overall only increased 16% in the City Centre zone but went up over 30% in the East and North East zones! The City Centre does make up the bulk of the condo sales but they are also the most expensive, with a benchmark price of $340,000. The East and North East zones have benchmark prices of $234,000 and $281,000 respectively.
A similar trend shows up in the detached segment, where City Centre houses (the most expensive of all the zones) increased just 9.5% but the East zone was 25%!
Another winner in Calgary was real estate developers and builders. Unlike so many years in Calgary’s history where builders are holding lots of inventory and giving buyers incentives to buy them, many builders couldn’t keep up to the demand. However, the flip side of this coin is rising costs. Both interest rates and labour & material costs are squeezing the profits for builders.
The biggest loser in 2023 real estate? First time buyers.
If you didn’t already own something, you didn’t get the benefit of selling the place you’re in (for a profit) to buy something else. You’re simply stuck with high prices, high interest rates and a low-supply market that means you need to decide quickly and offer aggressively. This is likely to continue through 2024.
Another loser in 2023 was renters. Estimates are that rental rates have increased 25% or more over the past year in Calgary. Those with kids or pets have had a tough time being selected when competing with so many prospective renters and there were stories of ‘open house’ style rental viewings with dozens or even hundreds of people.
If the Alberta net migration numbers keep up, the rental situation may continue to be tough this year. For those that are renting, it may be worth exploring what you could get approved to buy. You would be buying in an increasing market and would have the stability that comes from owning your home rather than wondering if you will get ‘renovicted’ or have a huge rent increase next year. And, if mortgage rates start to drop this year as predicted, it will help keep those mortgage payments under control.
For neighbourhood-specific stats packages, please feel free to reach out! We have lots of data we can provide for those spreadsheet lovers out there 🙂
-Amie
