As home-buying activity rebounds across the country from the COVID-19 pandemic, the condominium market in Calgary remains mired in a lengthy slump that has resulted in falling prices and a growing glut of new units that are sitting empty.
In June, condo sales surged 67 per cent from the previous month, but remain more than 30 per cent below long-term averages, the Calgary Real Estate Board recently said. Over the past year, the benchmark condo price has dropped 4 per cent ($10,000) to about $240,000.
It’s not simply a virus-induced downturn. Calgary’s condo market has languished for years and proved more sensitive to economic disruption than other housing segments. Given that Alberta faces a challenging recovery from COVID-19 and lingering oil industry woes, the prospects for a condo rebound look bleak.
“The condo sector’s been struggling for some time,” said Ann-Marie Lurie, CREB’s chief economist. “We have a lot of supply, and not just in Calgary, but in some of the areas surrounding our city, too.”
The supply glut can be traced back to the early 2010s, when oil was selling for more than US$100 a barrel, inspiring no shortage of developments.
By early 2015, nearly 10,000 condo units were under construction in the Calgary area, more than double the levels of mid-2011, according to Canada Mortgage and Housing Corp. figures. But at that point, crude prices were already in free fall and Alberta was coping with a brutal recession. As new condo units became available, sales were often difficult to come by.
“Really, our condo market started sliding with oil prices,” realtor Julie Dempsey said.
Plenty of new units sit empty. In 2017, there was a monthly average of 1,227 completed and unsold condos in the Calgary area, according to CMHC, up from an average of 29 units three years earlier. After a drawdown in 2018 and 2019, the number of empty condos has recently spiked to nearly 1,200 as of May.
Ms. Dempsey said she’s working with three developers to sell new condo units that, in some cases, have been sitting empty for quite awhile. “These are brand new homes that no one’s lived in and they’ve been for sale for three years,” she said.
In turn, sale prices declined sharply. As of the first quarter, new condo prices in the Calgary area have dropped by about 21 per cent since 2017, according to a home-price index published by Statistics Canada. By comparison, resale condo prices have fallen 9 per cent and the overall market by 6 per cent. New condos in Calgary are the worst-performing segment of housing across six major metropolitan areas tracked by Statscan.
The condo market also has to contend with relatively affordable prices in other segments. The benchmark price for a detached home in Calgary was about $475,000 in June, or slightly lower than a year earlier. For the attached segment, which includes townhouses, the benchmark price was just above $300,000, or down $12,500 from the previous June.
“All of a sudden, as prices have come down, there are more [buying] options for people,” Ms. Lurie at CREB said.
Despite a home-buying rebound last month, a bright outlook is hardly certain. Given both the COVID-19 hit and the oil-price drop, Alberta faces a steeper path to recovery than most provinces. In a recent forecast, Toronto-Dominion Bank said Alberta’s inflation-adjusted gross domestic product would shrink 7.9 per cent in 2020, worse than every province but Newfoundland and Labrador. The jobless rate is currently 15.5 per cent.
“In turn, this unfavorable backdrop will weigh on already-wary consumers and housing markets,” the bank said.
In the coming months, Ms. Lurie said, employment figures will be a key sign of how housing demand evolves, but warned of the impact from recent white-collar layoffs.
“Our economy’s been slower for a lot longer than most people originally expected,” she said.
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