Calgary Real Estate Forecast for 2014

The Calgary Real Estate Board has put together an extensive Forecast for 2014 and is cautiously optimistic expecting further growth as we are positioned well going into the year.

Undoubtedly 2013 was an interesting year in the real estate industry in Calgary with incredible growth in pricing and sales. Our net "in-migration" was certainly a contributing factor to the flurry of activity, the number of people entering the city far exceeded expectations. As a matter of fact, the past two years have been the two strongest years of in-migration since our heyday of 2006.

Much of the influx of new Calgarians has been due to the poor world economy in relationship to the robust economic and employment of our own micro-economy. This year, improving global economic conditions are expected to make it harder to attract similar numbers to our city, the City of Calgary predicts that we will see a much slower growth rate this year.

The second contributing factor to our growth was the extremely low vacancy rate in the residential rental market. Prior to the great flood, our vacancy rate was already at a dangerously low 1.7%. The short supply of rental product combined with the increased migration to the city and many displaced citizens due to the flood further affected the vacancy rate, CMHC reported that in October the apartment vacancy rates in Calgary fell to 1.0%.  The undersupplied rental market has placed upward pressure on rental rates, encouraging many would-be renters to consider purchasing a new home sooner than they had planned. Interestingly enough, the lack of rental properties has created a niche for new rental building including the proposed behemoth 58 storey Telus Sky.

What I personally find interesting and feel is somewhat overlooked in analyzing the market over the coming year are the many "micro-markets" within the city and surrounding areas. Last year there was a decrease in single family home sales under $400k of -16%, whereas homes over a million dollars increased by a whopping 30%. Both price categories contribute to the overall year-by-year increase of 8%, however, the buyers and sellers from each category certainly experienced a completely different set of pressures and strategies.

I would also say that although overall "general" inventory is down across the board, if we look at many specific communities we see that we actually have a very unbalanced inventory and over abundance of listings in some micro-categories. For example, looking at the corridor on the NW side of Calgary along highway 1A, we can see that there were three sales over $2 million last year. There are over 42 listings above $2 million today. I question what will become of some of these listings and the home owners... if some of these sellers absolutely have to sell their homes, they may opt to lower their pricing to increase their potential pool of buyers putting downward pressure on the market in this area. As pricing becomes more affordable to a new pool of buyers, they may move away from their original search areas. There certainly is a potential for some major downward pressure on the higher priced homes throughout Calgary and the surrounding communities as we see more choices become available.

If we look at specific price pockets within an area we also see some disturbing trends. In Panorama Hills - a community I often refer to in my Blogs as it is the largest community in Calgary - we see can see that the gap between price categories is getting larger and larger.  Last year 12% of the sales were over $600k, today half of the listings are in that price range. Last year 85% of the sales were under $550k, today only 35% of the listings fall within this range.

The gap between what a buyer is willing to pay - or perhaps what they can pay - in a specific community compared to the value sellers are asking for is getting wider and wider. I am not saying that the properties are not worth the price they are asking for, however, the pool of potential buyers is not anywhere near where it should be to have these properties trade hands. There are many contributing factors to this fact, including tightening guidelines from financial institutions and government policy. If we see this trend continue throughout the year, we may certainly see a slowing of the market.

We may see average and benchmark pricing increase at a slower rate compared to 2013, however, I would suggest a lot of that will be contributed to sales over $600k. I would also say that many of those high priced sales may be lower than the sellers originally anticipated. I would also suggest that if you have a large budget to purchase a home, you will likely get more bang for your buck this year. A great example of that is a beautiful estate home purchased in Church Ranches in 2012 for $3,650,000 (last year the highest price in the area was $2.8 million.) This sounds like a spectacular sale and certainly contributed to increased value in the community... this same property was purchased in 2007 for $6,350,000. Although it seems fantastic at the outset, the value of this property actually DECREASED $2.7 million from 2007 to 2012. We may not see this extreme in the coming year, I would suggest we will see similar scenarios though.

All in all I would agree that we are heading into an interesting time in our market. There will be some great value and both buyers and sellers will have the opportunity to do well. Being a savvy buyer and seller will be the key. Be sure you have ALL the information you need to make sound, informative decisions.

I would be happy to join your team of professionals as your real estate advisor and Realtor. Please do not hesitate to contact me if you have questions or concerns pertaining to real estate.

Wishing you continued growth throughout the year!