Parker and I attended the Calgary Real Estate Board’s annual forecast yesterday and there was a lot of news of growth in our city. I was about to type ‘good news’ but I think growth has many sides and there are both positives and negatives.
For people that have been holding onto properties they didn’t want anymore because the values were so low for so long, growth in real estate prices is welcome news. There were many landlords that were finally able to sell their condos last year for more than they paid for them.
For homeowners generally, they are happy to see their house increase in value.
But the rapid growth (over 40,000 net migration to the city of Calgary in 2023, the highest ever!) has also created classrooms and hospitals that are over capacity, traffic that – although it’s no Toronto traffic – is the worst Calgary has seen and rental rates that have been skyrocketing. And of course, increasing taxes and inflation are adding to the burden.
Most newcomers are loving Calgary and there’s something great about feeling the energy of a city with so many people out and about, but there are downsides as well.
The message of the forecast yesterday was continued growth but a slightly smaller increase in real estate prices than we saw in 2023. Let’s hop right to it. These are the numbers forecast by our in-house economist:
Detached houses: 4% increase
Semi-detached: 5.5% increase
Townhome: 9% increase
Apartment: 9.5% increase
Like 2023, the biggest areas of growth are in the lower price point categories. This is partially due to higher interest rates still affecting buyers’ borrowing power, but also due to how expensive houses have gotten generally over the past three years. Buyers are buying what they can afford and investors are also looking to lower-priced product so they can try and achieve cash flow.
The increases we saw in Calgary last year were quite varied across different areas of the city, but echoing the same message. The lower priced zones of NE and E saw the largest percentage increases in price, whereas the higher priced City Centre zone saw the smallest increases.
An interesting comparison was showing how detached homes made up 62% of the sales in 2021, 53% in 2022 and just 46% in 2023 while apartment sales increased from 15% of the sales in 2021 to 29% in 2023!
A couple of other important forecast numbers:
Interest rates: target overnight rate forecast to drop from 5% to 4% by the end of 2024
Employment growth: forecast to be 1.7% vs the 2.9% we saw in 2023
Population growth: forecast to be 3.6% vs the 4.7% we saw in 2023
These three numbers tell the story of WHY we will continue to see price increases in 2024. We have jobs, people keep moving here and they will have slightly more borrowing power by the end of the year.
Out of the jobs created in 2023, 94% were full time positions and 46% were in professional positions like science and technical services – jobs that pay well and allow people to afford their own home.
Who the forecast is good for:
- Any sellers but especially condo owners or anyone that is leaving Calgary for a cheaper place (wherever that may be??)
Who the forecast is neutral for:
- Those both buying and selling. It will be a low inventory market all year long so the buying side will be challenging whereas the selling side should be profitable. If you are increasing price categories drastically, you may want to think about buying sooner than later – for example, if you are selling at $500,000 and buying at $1,000,000, a 5% increase gets you $25,000 more on the selling side but loses you $50,000 on the buying side. Conversely, if you are downsizing, later in the year could give you an advantage but not necessarily if you are going from a detached house to a condo.
Who the forecast is bad for:
- First-time buyers. If you don’t own yet, you aren’t taking advantage of any increases in price and if you are renting, your rate will likely increase when it comes time to renew your lease. Rental rates rose 36% in the past two years and are forecast to increase another 10.6% this year! It may be worth playing with some hypothetical numbers – i.e. what would your mortgage payment be on a $400,000 condo at a 5% interest rate ($1,861 with 20% down) vs that same condo selling for $440,000 at the end of the year at a 4% interest rate ($1,851 with 20% down but you will also need to save an extra $8,000 for your downpayment). It may not cost much more for you to own your own place than to keep renting.
If you have been waiting around on the sidelines for different market conditions, they don’t appear to be on their way in 2024. If you are ready to make a change, let’s make it happen!
Our economist also felt that there is some upside risk on the projected numbers if net migration numbers outperform their forecast, as they did in 2023. That would mean rental rates and house prices increase even more than forecast.
We work in this market day in and day out so no matter your situation, we can help you work through the various options and decide on the best path forward.
Please reach out if you would like the full PDF of the Forecast, full of fancy charts and graphs 🙂
-Amie
