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Taehoon Kim outside of his new condo in Calgary, on March 11.Todd Korol/The Globe and Mail

Come springtime, Addie Laratta plans to list her Calgary condo. The monthly mortgage payments for her 1,400-square-foot unit in Skyview Ranch, in the city’s northeast, rose in 2023 from $900 to $1,600.

An “accidental” landlord, Ms. Laratta has been holding on to the property since 2018, as she first acquired the condo at the height of 2014 for about $325,000, shortly before Calgary’s economic downturn. “I paid high for it – I was very worried,” she says. “But with the situation now, it seems I won’t lose money. I’ll probably make my money back.”

In the face of unprecedented population growth, Calgary’s condo market has recovered and condo owners are finally cashing out. In January, the benchmark price in the condo segment reached $330,500, according to the Canadian Real Estate Association (CREA) data, breaking the city’s prior record of $288,700 in 2014.

However, despite the sale of nearly 7,900 apartment condos in 2023, builders have not rushed to add new supply, contributing to the resale inventory’s drop to 1.21 months of supply in February.

When condo prices surged a decade ago, more than 5,600 starts followed the completion of 2,825 apartment condos. By contrast, last year the Canada Mortgage and Housing Corporation (CMHC) recorded roughly 4,100 condo starts and 1,844 completions in the same segment.

One reason for this difference is that elevated interest rates have undermined the financial capacity of buyers, explains Ray Wong, vice-president of data solutions delivery at Altus Group. “The challenge in Calgary, and across Canada, is whether there’s demand to buy at this point, based on the interest rates. People are waiting for interest rates to come down a bit.”

But as rental rates in Calgary soar, some renters are opting to bite the bullet and buy their first home.

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'I believe buying now will save me money,' Mr. Kim says.Todd Korol/The Globe and Mail

Last December, after five years renting a room in northwest Calgary, Taehoon Kim decided it was time to become a homeowner and start building equity, as interest rates remained stable.

“I believe buying now will save me money,” he says. “If you buy now, you will pay more interest, but interest rates can go down later. When interest rates go down, house prices will go up, and you can’t change anything.”

While initially he’d hoped to buy a townhouse, prequalifying for a mortgage below $400,000 limited Mr. Kim’s alternatives, because row homes in this price range are scarce.

After a month-long search, he moved on a $360,000, two-bedroom, two-bathroom condo in Sherwood, a suburban neighbourhood in Calgary’s north, that his agent, Brielle Mickey of Royal LePage Benchmark, found off-market.

“I’d been looking at the housing market for about two years,” Mr. Kim says about his swift decision. “So I had an idea of how much I’d spend. I went to see three other condos, and that gave me context.”

Currently, Calgary’s median resale price in the apartment segment sits at $315,000, a 20-per-cent increase relative to last year. But as supply continues to tighten, snatching a property below this price point is a growing challenge.

As the supply of apartment condos shrinks in Calgary’s resale market, first-time buyers and investors compete against each other, accelerating price growth.

“The inventory issue is because many people aren’t selling,” says Amanda Ku, a Calgary realtor and property manager, pointing at how a smaller inventory across segments is keeping owner-occupiers from listing their condo. Consequently, resale supply is largely contingent on sellers who, like Ms. Laratta, are looking to exit the rental market.

On Feb. 28, there were only 150 single-detached homes, 213 townhouses and 558 apartments available for sale in Calgary, Ms. Ku says. “Everything else is pending, or already sold.”

But while apartment construction in the condo market lags behind, purpose-built rentals are booming in Calgary.

Unlike 2014, when roughly 80 per cent of apartments constructed were in the condo market, purpose-built rentals now comprise about 65 per cent of completions in Calgary, and roughly 60 per cent of all apartments currently under construction.

According to Cole Haggins, president of Cedarglen Living, a Calgary builder, multifamily builders in Calgary have been shifting toward purpose-built rentals over the past two years because this type of investment offers higher returns.

“There’s been a lot of out-of-province investors coming to the Calgary marketplace,” he says. “They’re not [general contractors] or builders themselves, they’re building on an investment basis and they’re hiring third-party [general contractors] to build these units for them so they can hold them long term, or sell them to a REIT.”

But Cedarglen isn’t shifting.

With 1,025 condos currently in the pipeline, 90 per cent of Cedarglen’s preconstruction units are already sold out, Mr. Higgins says, adding that he expects to build more than 2,500 condos over the next four years.

“The next few years will be our largest years by far in terms of the total volume that we’re going to do. … [But] the big question for our industry will be labour, and if we have the available trades to handle this increased capacity, as all my competitors are generally in the same position of growth.”

Although Cedarglen Living’s target market is downsizers, Mr. Haggins has noticed a significant spike in investor buyers for their smaller-sized product, a trend that’s without precedent in Alberta’s largest city.

“Now that interest rates have stabilized, and rents have gone up, there’s a wave of buyers looking at [condos] as an investment opportunity,” he says. “Nothing like this has ever been experienced before, in terms of buying units specifically for investment purposes – Calgary’s never been that marketplace.”

As a result, local realtors like Ms. Ku are struggling to find condos for her buyer clients. “I would love to get them in, but by the time I hear about a pre-construction sale, it’s already sold out.”

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