Calgary developers say condo sales dipped after December, but prices are holding. A residential tower under construction in Calgary, Alta., Thursday, June 26, 2014.(Jeff McIntosh/Globe and Mail)Jeff McIntosh/The Globe and Mail
Alberta's high-rise builders say they're weathering the economic storm caused by the downturn in the energy sector, and some are even finding ways to profit from it.
"We see this downturn as an opportunity to buy even more land and position ourselves to be first to market with our next development," says Robert Duteau, senior vice-president of development for Grosvenor Canada, which has had a presence in Calgary for a couple of decades, with two projects currently under construction in the Beltline. It also owns more land elsewhere in the city.
"Grosvenor is here for the long term," says Mr. Duteau. "As projects can take several years to design and execute, we will not change our approach with fluctuations in the oil and gas marketplace, which are a fact of life in Calgary."
Altus Group Ltd., which tracks the Alberta condo market, said in a report this week that sales of new condominiums in Calgary were down 61 per cent in the first three months of this year compared with the same time last year, and 53 per cent lower than the average of the last five years.
It was the same story in Edmonton, where first-quarter sales were down 60.5 per cent year over year and 41.5 per cent below the five-year average.
Grosvenor says buyer traffic into its sales centre slowed between December, 2014, and this March, and attributes this to the impact low oil prices had on consumer confidence and to a typical seasonal slowdown in demand. Come spring, the company says traffic numbers have regained some lost ground.
Mr. Duteau says Grosvenor has not intentionally slowed sales or discounted pricing, and both of the company's active projects – Smith, a 129-unit project, and Avenue, a 195-unit building – are under construction and presale targets have been met.
"As the towers start coming out of the ground, we are seeing increased buyer interest from those who may feel nervous about purchasing a home in a project by someone else where they don't know if – or when – construction will commence," he says.
Mr. Duteau doesn't expect to see sector-wide price drops, but this could occur in the resale market. Although there are incentives being offered for some new construction, "our expectations are that the experienced, high-quality developers will not drop prices."
Avi Urban, a builder-developer of low-rise condominiums, says that since last December, there has been a "marked" decline in absorption numbers, particularly among investors.
"Sales budgets were revised down by 30 per cent in March and will likely end closer to 50 per cent off initial projections by year-end if there isn't a significant increase in market interest," says Avi Urban president Charron Ungar.
Despite a decline in consumer interest, Mr. Ungar says sales prices are holding steady, although the company, unlike a year ago, is now relying on buyer-incentive programs.
On the construction front, Avi Urban has three developments slated for launch this year. As well, Mr. Ungar says the company has been successful in selling its ongoing projects in various locations in the city.
"The market, although light on investor traffic, has some demand from home buyers interested in taking advantage of the softer market conditions, and those looking for immediate housing for either relocation or lifestyle reasons," Mr. Ungar adds.
He says production this year will likely be similar to the initial budget and could potentially increase because of ease of access to skilled labour and products.
"The concern, however, is 2016 production as the increased sales volume this year will have a strong impact on what happens next year," he says, suggesting sales might well be stolen this year from next year's market.
Tim Logel, president and partner of Cardel Lifestyles, which builds four-storey wood-frame apartment buildings and two-storey townhouses, says the market is still generating some activity.
"It's okay for completed spec inventory, which seems to be the desired choice of product for consumers looking at the multifamily market," he says.
"If you have product ready to go, there is a healthy number of buyers."
There would appear to be some hesitation about buying in a project that hasn't been started, just in case the economy continues to decline and construction of those buildings not yet out of the ground will come to a halt.
Mr. Logel says one of the bright points from a marketing perspective is that strong migration in the three previous years brought more than 30,000 people to the city – and they are the ones hungry to get into home ownership.
"They are the ones in the show homes and sales centres, they are among the serious buyers we are seeing. But they are being cautious and looking for value," he says.
Looking down the road a ways, Mr. Logel says that when the standing inventory totals start to come down, there will be a pickup in presale programs and growth in pent-up consumer demand.
All long-time players in the Calgary housing market have been through these boom-and-bust cycles before, and all of them have taken a similar attitude to that voiced by Mr. Ungar.
"Like all cycles, the energy market will bounce back. I have to be bullish on this point because so many factors remain at play – low mortgage rates, housing affordability and healthy inventory levels – that warrant this approach," he says.