Concerns over oil’s recent slump has led to some challenging times in Alberta’s luxury real estate market.Chris Bolin/The Globe and Mail
With Alberta's economy in a tailspin, it would seem an inauspicious time to open a new luxury real estate brokerage. But European powerhouse Engel & Völkers has done just that.
According to E&V Calgary chief Mark Evernden, who opened the company's local office three months ago, oil prices can go up and down, but high-end buyers still need a place to live.
"Oil and gas has its peaks and valleys," says Mr. Evernden, "but I find when you're dealing in these values, these individuals, families and corporations still have the financial stability and wherewithal to do what they need to do.
"In the $700,000 to $1.5-million price point, it's a little more affected and not as steady, especially as lenders become tighter," he says. "But even with stickier lenders, low interest rates have high-end buyers continuing to make the move."
Matthew Boukall, who tracks the Alberta real estate market for Altus Group Ltd., says it's a challenging time in the luxury market.
"We're seeing everything taking a breather, which isn't a big surprise," says Mr. Boukall. "The high-end market is softening as it's much more discretionary. That's the challenge of any high-end product – during a downturn, people who don't need to buy, don't. We haven't seen massive price decreases; we're just seeing less activity."
A lack of recovery in oil has many concerned about their employment status and financial stability. Such concerns affect consumer confidence, especially for big purchases like homes. Mr. Boukall sees the "confidence challenge" as a major barrier for Calgary's current real estate market across all values. "Unless your home suddenly doesn't fit your needs, you're less likely to move in a downturn because you don't have the confidence to proceed," he explains. Particularly for luxury homes, the decision to buy is rarely based on necessity. "Most people don't need 3500+ square feet or eight bedrooms, so it's a discretionary play."
Despite the cooling market, Mr. Evernden says big sales are still happening. In fact, he just closed a $3-million cash deal.
Mr. Evernden helped establish Sotheby's International Realty when they arrived in Calgary a few years back and says he'll do the same for E&V. Right now, he's focused on building brand awareness while contending with the marketplace. "We're definitely seeing a slowdown," he says. "People are not ready to go to pen and paper as quick as they were before."
Mr. Boukall says the addition of a new high-end brokerage to Calgary's luxury real estate market could actually drive sales by simply filling a service gap.
"If we go back five years, the ultra high-end market was serviced by a few agents who targeted those homes and knew how to service high-end buyers," says Mr. Boukall. "They served a niche. Then Sotheby's came in and brought international cachet. Engel & Völkers is trying to repeat that same success."
Mr. Boukall attributes some of Sotheby's success to the simple fact that Calgary's high-end market wasn't properly serviced before it came in. He draws a parallel to high-end car dealerships that have opened in Calgary. "It's not as though people here had never seen a Ferrari or a Lamborghini before you could buy them here; they just got that service elsewhere. Now that the local market has grown enough, they can be supported locally."
But is there room in Calgary's relatively small luxury market for a new player, especially during an economic slump? Mr. Boukall points out that a new brokerage won't necessarily mean a growth in the number of agents who service the high-end market. "The agents can now align themselves to brokerages that provide better high-end services and probably better access to high-end buyers. But if the high-end market is better serviced, you will probably see more people make that buying decision. If you don't have someone who can show you what's for sale or you simply don't know these properties exist, you can't buy them."
Mr. Evernden says E&V will remain small in Calgary to prevent dilution of the brand. And he sees a silver lining to a slower sales climate.
"Right now, we're able to establish our brand a lot more readily," he says. "When the market is hot, everything is moving fast. People don't look at the brands or the value adds that a brand can bring, they just want to get the deals done. The timing now has positioned the company very well in regards to educating our consumer on the value that Engel & Völkers brings to the market."
Mr. Boukall sees two basic benefits to E&V's arrival on the Calgary scene. First, "choice is always good for the consumer," he says. "A new competitor will force brokerages to prove their value, and in particular, prove there is net value back to the consumer from a high-end brokerage.
"The other benefit – though it's very difficult to prove – is that an international company like Engel & Völkers has ties into foreign markets that a local brokerage wouldn't. The drop in the Canadian dollar, we know, is having an impact in Vancouver and Toronto, so they could import those buyers into our local market."
"Higher-priced homes require much more exposure using additional digital global partners and print partners that other brokerages can't fulfill for the customer," says Mr. Evernden. By going beyond traditional marketing and tapping into E&V's international network, he says they are seeing both Americans and Europeans looking in and around Calgary. "I can offer my clients 50 times the exposure outside of North America and that's where our strength is," he asserts. "Consumers want more for their dollar."