What has normally been a bellwether of a nearing pickup in home sales in Calgary is not a sign of better days ahead this time around, a market research company suggests.
In a new report, Morguard notes that improving economic conditions are expected to put further downward pressure on the city’s rental-vacancy rate as people are attracted back to the city for improved employment prospects. Previously, this has led to an uptick in homebuyer, Keith Reading, director of research for the real estate company, explains.
“Typically what’s happened in the past is as rents in apartments have gone up, you get to a point where your rent is so high — particularly in the larger unit sizes, so the three bedrooms — [ownership] housing starts to make more sense in terms of the expense and the cost,” Reading tells Livabl.
“But there’s a couple things that are making it a little bit different these days,” he adds.
To begin with, although Calgary home prices remain below the 2014 peak, the market isn’t exactly cheap for buyers, especially with the expanded stress testing introduced by the federal government at the start of the year.
“They’re still pretty expensive, in comparison to rental,” says Reading of home prices in Calgary, where the benchmark price of a home was $426,300 last month, according to the Calgary Real Estate Board (CREB).
And while the rental market appears to be on its way to tightening, the vacancy rate is coming down from a 25-year high of around 7 percent. Meantime, the median rent for a one-bedroom apartment was $1,150 last month, roughly half what it costs to lease a similar unit in Toronto, according to PadMapper.
Reading estimates it will be 18 months before there is meaningful upward pressure on rents. From that point, it will still be a number of years before renters might be encouraged to dip their toes in the ownership market.
“It’s going to be a longer-term situation,” says Reading. “You’ve got the new mortgage qualification guidelines, so it’s harder to get a mortgage, you’ve got to have a bigger downpayment, and also the fact that your apartment market needs quite a bit more improvement before rents start to move significantly,” he adds.