Unlike similar properties in Vancouver and Toronto, condos in Calgary are often regarded as a questionable investment due to their sensitivity to local economic swings. Nevertheless, in 2021 Statistics Canada found that more than 60 per cent of condo units in Calgary’s central neighbourhoods were rented out by investors –the largest share in Canada.
Some of the reasons for this are related to the lower barriers investors face in entering this market, compared to more expensive cities, as well as the prevalence of “makeshift” investors in Calgary’s condo market, explains Amanda Ku, a Calgary realtor and property manager.
The availability of larger homes at a reasonable price-point, means that for many Calgarians condo living is a temporary choice. And although new residents initially choose to live in a condo upon moving to Calgary, eventually they relocate to a more spacious home elsewhere in the city. “Calgary has been positioned as bigger bang for your buck, based on the affordability compared to Vancouver and Toronto,” says Ray Wong, vice-president of data operations at Altus Group.
Indeed, seeking more space in the face of lifestyle changes, Calgarians usually live in a condo for up to seven years, Ms. Ku says, but in Calgary’s boom-and-bust economy, this often means condo owners have to choose between selling at a loss or holding on to their property until the market shifts – and many choose the latter.
After the birth of their first child in the fall of 2020, Ryan Meier and Christina Mattern realized that their idea of raising a child in a two-bedroom condo in Calgary’s Beltline would be more challenging than they expected.
With both working from home during the pandemic, space in their unit became insufficient. The couple was also concerned about construction and vehicle noise interrupting their newborn’s sleep patterns. “The sound was the straw that broke the camel’s back,” Ms. Mattern says, noting that having the grandparents had been an important consideration.
“We want a space where we can have our family visit and feel comfortable, and for us to be comfortable in our own space,” she says. “So that got us thinking we need[ed] to stretch our wings and leave the downtown to find something with at least another bedroom.”
While life in the Beltline was ideal for the Millennial couple, they had to trade some of the perks of living at this location for the spaciousness of a four-bedroom duplex in Mount Pleasant, an inner-city neighbourhood in Calgary’s northwest.
“I originally chose the Beltline largely for the lifestyle,” Mr. Meier says, emphasizing the neighbourhood’s walkability and being in close proximity to friends, work and nightlife on 17th Avenue. “It was the place to live, if you’re going to live in a condo.”
Having purchased the Beltline condo in the summer of 2015, when condo prices were starting their steep decline, Mr. Meier decided to hold on to the property instead of selling at a loss when he and his wife moved out in 2021. “[We’re] waiting for the market to turn around a bit more in terms of the value of properties in the condo market,” he says. “That would be a factor that would impact our decision to sell, if we can recoup what we put into the original purchase price – that’s a gap for us at this moment.”
Mr. Meier and Ms. Mattern are well-positioned to make this decision, as he purposefully acquired a condo property that would be competitive in Calgary’s rental market in the future, and opted for a larger unit in a recently renovated building with reasonable condo fees, as well as inexpensive amenities.
And his effort paid off. In the summer of 2021, the couple rented out their condo to tenants who’ve renewed their lease for a second year. “We were a bit worried at the time,” Mr. Meier says. “But we didn’t have any trouble finding what turned out to be really great tenants.”
For those looking at their condo property as a long-term investment, Calgary’s market can present many opportunities, as roughly 40 per cent of the rental market in this city is supplied by condo units. According to Ms. Ku, investors in her portfolio tend hold on to their condo properties in Calgary between 10 to 15 years.
“It really depends on the individual’s return expectations,” Mr. Wong says. “How long do they want to hold the asset before using that to get started in the real estate sector and eventually using that property to buy another, or to fund their own place down the road.”
This year, an influx of people relocating to Calgary has reinvigorated the demand for condo properties in both the resale and rental market. In the second quarter of 2022, net interprovincial migration in Alberta recorded the largest increase since 2014.
Additionally, higher interest rates have been beneficial for this segment. “The higher interest rates will push people out of various property types, and impact what people can afford,” says Ann-Marie Lurie, chief economist at the Calgary Real Estate Board (CREB).
In September, despite a softening of Calgary’s residential market, year-over-year sales in the condo segment increased by 60 per cent, according to CREB data, creating balanced market conditions for the first time in eight years. “We haven’t had a three-month supply scenario since back in 2014,” Ms. Lurie says, noting that since the economic downturn the months of supply in September have averaged about five months.
Driven by interprovincial migration, increased demand has also allowed for moderate price gains in this segment, with condo benchmark prices rising over 10 per cent so far this year – the largest yearly increase since 2014. “[Prices] have had some strong gains,” Ms. Lurie says. “But for some condo sellers, it still depends on when they bought.”
For those who purchased a condo unit in the wake of the 2014 downturn, like Mr. Meier, prices are yet to catch up. In September, 2014, the benchmark price for a condo unit in Calgary was $298,800, today it’s $277,900.
Newer builds located in walkable, amenity-rich communities are better positioned to capitalize on price gains, Ms. Ku says, as the growing demand for this type of property ensures a competitive cash flow for investors whether a unit is rented out in the long- or short-term market.
In the coming months, however, price gains and sales in Calgary’s condo market could be affected by further interest rate hikes, Mr. Wong says. “Potentially two more interest rate increases this year may slow down investors.”
Higher interest rates are also likely to limit the opportunities for first-time buyers to enter the market, he adds, fuelling the demand for rentals and boosting the appeal of condos as investment property.
“I don’t think we’re going to see an overall downward trend [in prices], but we may see a levelling off – it depends on how many people are looking at this from an investment perspective.”