Demand for condos rises as buyers shift sights

Higher borrowing costs are turning home buyers to more affordable housing types, shows trend noted by the Calgary Real Estate Board.

Calgary real estate market remained red-hot to kick off the summer, seeing surging demand for condominiums that are driving sales to record heights last month.

Calgary Real Estate Board numbers reveal the city’s resale market set an all-time high for June sales with 3,146 transactions across all housing types.

Driving sales, however, were not single-family detached homes, which traditionally make up the majority of transactions in the city. Rather, condominium apartments are seeing fever pitch demand due in part to the segment’s relative affordability to other parts of the market, says Ann-Marie Lurie, chief economist with CREB.

“Prices have really just come back to where they were (at the peak in 2014) — not adjusted for inflation,” she says, referring to the benchmark price of a condominium in Calgary finally breaking through the previous historical high set nearly a decade ago.

The previous benchmark high price for apartment condominiums in Calgary in June 2014 was about $299,000. In June, the benchmark jumped about nearly 12 per cent year over year to reach $303,200, CREB data shows.

The current price levels for condominiums is also likely to lead to more inventory in the coming weeks, says Corinne Lyall, broker/owner of Royal LePage Benchmark.

“I know there have been a lot of people wanting to sell their condo apartments, but there just hasn’t been the right time.”

Now might be that time, she adds.

With the high demand last month, however, inventory for condominiums fell in the city 27 per cent year over year. That said, it is the smallest slide percentage-wise among all segments. Row homes saw the steepest drop of 47 per cent, which might have held back sales in the second least costly segment behind condominiums, Lurie says.

To that point, townhome (row) sales fell six per cent year over year, the only segment to see sliding sales in June.

“For every housing type, there is just not much supply,” she adds.

Townhome and apartment segments, however, have the highest sales-to-new-listing ratios, reflecting conditions favouring sellers the most.

Their price points (townhomes’ benchmark at $400,000, up 11 per cent year over year) make them more accessible for first-time buyers, Lyall says. Interest rates are a driving factor for these buyers, she adds. But higher rates are also a challenge for move-up buyers.

“People don’t want to move because they already have a good interest rate.” Lyall further notes that these individuals do not want to sell unless they must because, even if they can port their current mortgage, they still end up paying a higher interest rate.

That’s led to a dearth of choice among single-family homes priced less than $600,000, Lurie says. As a result, the benchmark — the typical price for the segment — was $685,100 in June, up six per cent year over year.

“Choice in the lower priced end of the detached market is disappearing,” she says. “The under $600,000 price range is now about 24 per cent of the segment.”

But only two per cent of supply is priced under $400,000, she adds.

What’s more, single-family detached home sales made up 48 per cent of all sales last month.

“This a new trend,” Lurie notes. And as prices climb, that share of activity is likely to decline even more.

“This tends to happen as cities grow over time,” she adds, pointing to Toronto where condominiums make up the largest share of sales.

Still, single-family detached homes are likely to remain the largest segment of activity for some time in Calgary. Even though their share has fallen, single-family home sales counted 1,525 in June compared with 857 sales for apartments. Although it is harder for new builders to add single-family homes in lower price ranges, current conditions do not foretell “the end of detached,” she says.

“There is still a lot of land left to develop in Calgary.”

Source by calgaryherald.com