Condo prices in Calgary are expected to dip this year, as the market continues to face excess inventory.
In 2018, the benchmark price of a condo is slated to hit $260,832, representing a one per cent decline compared to 2017 prices, according to the Calgary Real Estate Board’s (CREB) 2018 forecast, released in January.
“Prices are actually lower than what they were in 2007, so there’s just been no appreciation in that market,” CREB chief economist Ann-Marie Lurie, CREB chief economist tells BuzzBuzzNews.
Lurie attributes the price drop to an abundance of condo supply, particularly in the rental stock, that has been impacting the market since 2014 — the start of Alberta’s two-year economic downturn.
“There’s been a lot of [housing] starts, too much product and demand is still not enough to support any significant absorption of that supply. It’s still weighing on prices,” says the economist.
Since the recession ended, Calgary is on a slow path to recovery, with overall supply continuing to outweigh demand. Lurie also notes that population growth is low in the city and that’s not expected to change in 2018.
In 2017, condo inventory almost hit a record level with a total of 1,602 units, just below the average peak level of 1,669 units recorded in 2008.
As a result, the average price of a condo plummeted to $263,475 in 2017, four per cent below 2016’s price level and 12 per cent below the price high observed in 2014.
In addition to excess supply, Calgary’s condo market is faced with a new mortgage stress test, which came into effect on January 1, along with interest rate hikes.
According to Lurie, these factors actually might help improve activity in the condo market this year, as condos offer a more affordable homeownership option. But, she notes that with competition from new product, many buyers will likely flock to the new condo market instead of the resale segment.
There is some hope that prices will stabilize by the end of 2018 — but that relies on a significant shift in supply or an uptick in demand.
“By the end of the year, we might see some activity level off. With builders, we’re expecting to see some slowing starts this year, so hopefully there’s less pressure on inventory,” says Lurie.