MARKET UPDATE FOR CALGARY REAL ESTATE IN DECEMBER 2024
**Click HERE to watch 2025 Market Predictions VIDEO instead**
Calgary
Calgary's residential housing market enters 2025 undersupplied, with:
i) a high rate of sales (owing to recent net migration), and,
ii) a high rate of new listings (owing to recent high interest rates.)
The table below is a repetition of the Calgary table above, with the important addition of the January 2024 panel for comparison. We have also added notes in white and two boxes.
As you can see from the notes, the apartment market has nearly balanced (still a technical seller's market, but balanced conditions "on the ground"). In contrast, other housing types are still in technical heavy seller's markets, by the absorption rate measure, at least (various conditions on the ground).
Let's observe the statistics inside the two boxes in the table below:
WHITE BOX (The No Condo Fee Middle Market): The white box shows us that in all but the lowest and highest price brackets, housing types without condo fees (primarily detached & semi-detached) homes are in largely the same supply-demand positions as they were this time last year. We think the relevant question is: "What happened next?" In the first 6 months of 2024, we saw 0-1.5% a month price appreciation in this box, depending on the price tranche within the box.
However, differences between now and last year exist. We are now well into the (variable) rate-cutting cycle, and other policies are more expansionary. Immigration policies are tighter and less certain (possible new Federal Government), and US/international politics are arguably less predictable/positive. We also have a "hangover" of lower confidence from the recent balanced period (Q3, Q4 of last year).
Thoughts for the white box for 2025: We appear to be on the brink of more appreciation due to the great Canadian housing shortage, and we expect that to occur once headwinds caused by US/Canadian politics disappear. Until that time, we expect the rate of new listings to remain elevated. We expect an active market and a strong move-up market. If you are looking to move up to a larger or more expensive home, it could be good to start that conversation now. Downsizers might want to hold off moving if you can't decide (let's chat about the specifics though).
December 2024 did not see more listings than December 2023, and we will be watching this number closely. At the end of January, if that number is still not elevated vs Jan 2024, that would be a strong signal, that this better-supplied last few months inside the white box is coming to an end.
PINK BOX (Properties with Condo Fees): You can see that things have changed more in this box. New construction in the Calgary area has been better diversified across product types than in other cities in Canada, but there is still a heavy apartment weighting. Many of those projects, started in 2020/2021 are now producing finished apartment units, mainly as purpose-built rentals, but also as condominiums. We have had many calls from potential sellers, predominantly in Ontario who were sold these (presale) during COVID. Rents are down around 5% which impacts investor decisions on the margin.
Opposing the above, strong demand for condos is set to continue, due to their relative affordability, especially by those who are new-to-Canada.
We don't yet know the effect of expansionary policies (and rates) on the Calgary condo market. There will be more demand for housing from Albertans, but will the shift (substitution) into more expensive housing dominate?
Overall, our guidance is to expect more balanced conditions in the market for apartments in 2025. Only if we see a renewed, prolonged appreciation of other housing types, do we think apartments will follow (later).
Townhomes are also included in the pink box, but they really deserve a special mention. Townhomes remain extremely popular, and we expect them to closely follow detached/semi-detached properties. They are closer to the concept of land, they are functional for modern life, relatively affordable, and not easy to build in volume. So far, since 2020, they have been the most successful housing type for value, and currently, we are sitting with 2 months of inventory (MOI) - in line with detached, not the 3+ MOI for apartments.
Other Unknowns
We have noted politics, but what else?
One question I have for the 2025 market is how much will decreasing rates reduce inflows of people into the province from BC/Ontario (as variable mortgage payments there become more affordable)? Based on the lower number of inquiries we are getting from out of province, we strongly believe that this process is happening. We also know from population statistics that net migration has slowed.
The strength of the US economy, as well as turmoil at the Fed, will dominate fixed interest rates. All very unpredictable!