News   Apr 03, 2020
 3.3K     1 
News   Apr 02, 2020
 5.2K     3 
News   Apr 02, 2020
 2.8K     0 

Calgary real estate market

DougB

Active Member
Member Bio
Joined
Apr 12, 2017
Messages
657
Reaction score
1,413
Location
On the Beach
Not sure if this is tongue in cheek or not... but inner-city Calgary IS unaffordable to buy a single-family home. Which is fine but there needs to be far more missing middle infill built so those people who want to be in the inner-city can be. And can be in a place that isn't a condo.
I'm serious. The world needs higher interest rates to bring down housing prices.
 

CalgaryTiger

Active Member
Member Bio
Joined
Jun 12, 2020
Messages
812
Reaction score
5,228
Location
Marda Loop
I'm serious. The world needs higher interest rates to bring down housing prices.
I don't think making homes more unattainable is the answer.

Yes, higher interest rates would make the buyer pool smaller, which in theory should lower prices, except inventory hasn't been this low in 17 years. That's the issue with making money more expensive is you make it more expensive to build and that drives the supply problem.

Also, higher selling prices help with selling your home but then you need to buy another home.

This doesn't get into what's happening in the rental market... Friends of mine are not able to afford their increasing rent (up 30%), they can't afford to buy in the neighborhood they currently rent in, so what now? Buy/rent in the suburbs. This is what we want?

Supply is THE issue, suppressing purchasing power with higher interest rates only seems to feed into the rental problem.
 
Last edited:

DougB

Active Member
Member Bio
Joined
Apr 12, 2017
Messages
657
Reaction score
1,413
Location
On the Beach
I don't think making homes more unattainable is the answer.

Yes, higher interest rates would make the buyer pool smaller, which in theory should lower prices, except inventory hasn't been this low in 17 years. That's the issue with making money more expensive is you make it more expensive to build and that drives the supply problem.

Also, higher selling prices help with selling your home but then you need to buy another home.

This doesn't get into what's happening in the rental market... Friends of mine are not able to afford their increasing rent (up 30%), they can't afford to buy in the neighborhood they currently rent in, so what now? Buy/rent in the suburbs. This is what we want?

Supply is THE issue, suppressing purchasing power with higher interest rates only seems to feed into the rental problem.
Higher interest rates don't make home less attainable. Demand can only support certain price poiints, so a greater percentage of a mortgage payment would go to interest, meaning that principal falls accordingly. This will place downward pressure on land values, the amounts governments can charge in development fees and property taxes, commissions for agents and brokers and profit margins for landlords.
 

ThujaPlicata

Active Member
Member Bio
Joined
Jul 27, 2019
Messages
158
Reaction score
2,099
Location
Mission
If you don't ask for the big bucks you never get it.

Here is one in Lake Bonavista on a pretty typical block end, on a not as quiet street, which doesn't back on the lake, asking more than $2 million. But it is huge (5092 Sq Ft), with a three car garage.

View attachment 462647
2 million for a house that has no trees, basically no green space in the backyard and is basically 50% concrete surface? But hey, you can park up to six cars?! 🙌

Yeah - no thanks .
 

Cowtown

Senior Member
Member Bio
Joined
Oct 30, 2015
Messages
1,589
Reaction score
9,093
Location
Calgary
Many of the elements are here except jobs. The unemployment rate in Calgary is still around 8%. In boom times it was around 4%. The gap could close but I think we would have to see most of the big O&G companies in hiring mode. The only way they are going to do that is if new projects come back off the shelf.
The unemployment rate is high but somewhat deceiving, Calgary's growth of 50K last year would have been made up mostly from migration (around 42K) which would probably helped keep it high.
 

CalgaryTiger

Active Member
Member Bio
Joined
Jun 12, 2020
Messages
812
Reaction score
5,228
Location
Marda Loop
Higher interest rates don't make home less attainable. Demand can only support certain price poiints, so a greater percentage of a mortgage payment would go to interest, meaning that principal falls accordingly. This will place downward pressure on land values, the amounts governments can charge in development fees and property taxes, commissions for agents and brokers and profit margins for landlords.
The price points in the inner-city are at a point where interest rates likely don't affect that person's decision of whether to buy or not. IMO higher interest rates do not drastically affect the high-end of the market, while they likely remove buyers from the entry-level market. The low-end/entry-level is what it is as the margins are pretty tight, so you won't be see that range come down you'll just see less demand and thus less developer motivation to actually build entry-level than there already is. I would argue the only place that type of development exists now is in small condos or in the suburbs.

I also think any changes in price and the waterfall affects of that in the Calgary market will take a very long time to be realized. There is simply too much demand because of the relative affordability compared to Toronto and Vancouver and the fact that although unemployment is higher there are still a lot of people with good-paying jobs.

My point being, supply of mid-level, decent size property in the inner-city is very small. And IMO supply of entry-level inner-city property is up to the public sector.

But maybe that's just my reality.
 

DougB

Active Member
Member Bio
Joined
Apr 12, 2017
Messages
657
Reaction score
1,413
Location
On the Beach
The price points in the inner-city are at a point where interest rates likely don't affect that person's decision of whether to buy or not. IMO higher interest rates do not drastically affect the high-end of the market, while they likely remove buyers from the entry-level market. The low-end/entry-level is what it is as the margins are pretty tight, so you won't be see that range come down you'll just see less demand and thus less developer motivation to actually build entry-level than there already is. I would argue the only place that type of development exists now is in small condos or in the suburbs.

I also think any changes in price and the waterfall affects of that in the Calgary market will take a very long time to be realized. There is simply too much demand because of the relative affordability compared to Toronto and Vancouver and the fact that although unemployment is higher there are still a lot of people with good-paying jobs.

My point being, supply of mid-level, decent size property in the inner-city is very small. And IMO supply of entry-level inner-city property is up to the public sector.

But maybe that's just my reality.
Interest rates factor into any decision that involves financing. Rates were so low for so long that many prospective buyers have yet to adjust their expectations (i.e. rates are unlikely to decline substantially).I agree that the impact may take a long time to be realized.

The markets aren't as disconnected as you think. Someone moving upmarket has to sell their previous property to someone who has to sell their previous property.

Things are not different this time - they never are. Every rate tighteneing in the past has crashed the real estate market (ex. early 80s, late 80s/early 90s). This time will be worse because leverage is so much higher.
 

CalgaryTiger

Active Member
Member Bio
Joined
Jun 12, 2020
Messages
812
Reaction score
5,228
Location
Marda Loop
Interest rates factor into any decision that involves financing. Rates were so low for so long that many prospective buyers have yet to adjust their expectations (i.e. rates are unlikely to decline substantially).I agree that the impact may take a long time to be realized.

The markets aren't as disconnected as you think. Someone moving upmarket has to sell their previous property to someone who has to sell their previous property.

Things are not different this time - they never are. Every rate tighteneing in the past has crashed the real estate market (ex. early 80s, late 80s/early 90s). This time will be worse because leverage is so much higher.
I'm a nobody, but I just don't see interest rates going high enough to crash the real estate market. Government wouldn't let that happen, too many people's retirement is tied up in their homes. There was an old article from 2021 I read yesterday on how much of the feds budget that's dedicated to seniors, its significant and growing, now imagine if they needed to bail out even more seniors that lost their retirement savings because the real estate market collapsed. The article's point was aside from mine but yeah.

Article's point: Too much of the money will go to seniors who are not in need, and could be better invested elsewhere.

Some arguments it makes:

Old Age Security (which goes to most seniors) and the Guaranteed Income Supplement (for low-income seniors) will cost an estimated $81-billion in 2025. That figure is $22.2-billion more than the $58.8-billion spent last year – close to a 40-per-cent jolt higher in the span of just five years.

OAS payments are reduced only for seniors starting at an income of about $79,000. That level exceeds Canada’s average income by $30,000.
 

DougB

Active Member
Member Bio
Joined
Apr 12, 2017
Messages
657
Reaction score
1,413
Location
On the Beach
We will see if central banks are truely independent in that they disregard political factors when setting interest rates.

OAS is inflation indexed, so the government is in a Catch-22: higher rates will likely reduce accumulated real estate wealth, but will reduce inflation. Canceling the already announced increase in OAS eligibility from 65 to 67 was perhaps the most inept move made by a government that has made mostly inept moves.

Regardless, most seniors will still be in the money if their real estate portfolios decline say 25%.
 

artvandelay

Active Member
Member Bio
Joined
Jul 26, 2017
Messages
357
Reaction score
1,279
I'm a nobody, but I just don't see interest rates going high enough to crash the real estate market. Government wouldn't let that happen, too many people's retirement is tied up in their homes. There was an old article from 2021 I read yesterday on how much of the feds budget that's dedicated to seniors, its significant and growing, now imagine if they needed to bail out even more seniors that lost their retirement savings because the real estate market collapsed. The article's point was aside from mine but yeah.
It might take a few more months, but I actually think interest rates at their current levels will have a major impact on the market bubbles in Toronto and Vancouver - less so in Calgary, but housing is already affordable here.

A variable mortgage payment on the average home in Canada is already up over $1,000 per month. People might have the ability to absorb that in the short term, but only a minority have enough disposable income to bear increased debt service costs in perpetuity.
 

CalgaryTiger

Active Member
Member Bio
Joined
Jun 12, 2020
Messages
812
Reaction score
5,228
Location
Marda Loop
We will see if central banks are truely independent in that they disregard political factors when setting interest rates.

OAS is inflation indexed, so the government is in a Catch-22: higher rates will likely reduce accumulated real estate wealth, but will reduce inflation. Canceling the already announced increase in OAS eligibility from 65 to 67 was perhaps the most inept move made by a government that has made mostly inept moves.

Regardless, most seniors will still be in the money if their real estate portfolios decline say 25%.
I guess what I'm saying is even if the central banks acts independently, seniors will be made whole by the feds (Con and Lib). This will happen for no other reason than seniors are the ones whom vote.

It would actually be easy for them to implement: If your municipal property assessment has gone down X%, over Y number of years, then you get Z amount of money.

It might take a few more months, but I actually think interest rates at their current levels will have a major impact on the market bubbles in Toronto and Vancouver - less so in Calgary, but housing is already affordable here.

A variable mortgage payment on the average home in Canada is already up over $1,000 per month. People might have the ability to absorb that in the short term, but only a minority have enough disposable income to bear increased debt service costs in perpetuity.
I don't think interest rates in isolation have impacted those areas. Wasn't there a change to foreign buyer rules too? Calgary's foreign buyer was investors in Toronto, not sure interest rates affect them.

Maybe TMI but my variable mortgage has gone up $800/month. Needless to say it has significantly eaten into my disposable income. So personally I cannot withstand the rates going that much higher.
 

DougB

Active Member
Member Bio
Joined
Apr 12, 2017
Messages
657
Reaction score
1,413
Location
On the Beach
Fairly average priced scenario with conservative assumptions easily shows prices dropping 23%:
Value
$ 650,000.00​
$ 498,813.38​
-23.3%​
Mortgage (25% down)
$ 487,500.00​
$ 374,110.03​
Rate 5 year term
2.50%​
5.00%​
Amortization (months)
300​
300​
Payment
($2,187.01)​
($2,187.01)​
 
Last edited:

DougB

Active Member
Member Bio
Joined
Apr 12, 2017
Messages
657
Reaction score
1,413
Location
On the Beach
A more extreme scenario, which wouldn't be out of the ordinary in BC or ON, shows a 31% decline
Value
$ 900,000.00​
$ 621,196.32​
-31.0%​
Mortgage (10% down)
$ 810,000.00​
$ 559,076.69​
Rate 5 year term
2.00%​
5.50%​
Amortization (months)
300​
300​
Payment
($3,433.22)​
($3,433.22)​
 

JustDandy

New Member
Member Bio
Joined
Jun 8, 2017
Messages
76
Reaction score
249
Location
Coquitlam
It might take a few more months, but I actually think interest rates at their current levels will have a major impact on the market bubbles in Toronto and Vancouver - less so in Calgary, but housing is already affordable here.

A variable mortgage payment on the average home in Canada is already up over $1,000 per month. People might have the ability to absorb that in the short term, but only a minority have enough disposable income to bear increased debt service costs in perpetuity.
For what its worth the market has started grinding higher here in the Greater Vancouver area. Activity is starting to pick up as well after bottoming out in fall. This is starting to look like the best buying opportunities are now gone (although the quality of stuff on market is pretty bad) for this bottom.

i know i just sold one of my completed houses for 20k less than peak ask.
 

Kōsō

Active Member
Member Bio
Joined
Dec 14, 2019
Messages
151
Reaction score
1,599
Not sure if this was mentioned here or not, but Anthem United recently acquired 1015-4th Street SW. I assume they will continue to lease it out till redevelopment is a more lucrative venture.
The building
 

Top