The province of Alberta has faced a myriad of challenges in the aftermath of the coronavirus pandemic. In addition to a global economic downturn amid the COVID-19 public health crisis, the price of crude oil crashed to levels never seen before. It was a double whammy for the western province that affected every industry throughout the region, including the Calgary real estate market.
Are conditions beginning to normalise? The energy sector has rallied, with crude prices advancing to their best levels since March. The broader economy has rebounded as the gross domestic product (GDP) surged 6.5 per cent in June, up from the 4.8 per cent increase in May. Much of the housing market has returned to pre-pandemic levels.
Is Calgary improving, too? The real estate market is beginning to see some improvements. According to the Calgary Real Estate Board (CREB), sales of single-family and townhomes recorded year-over-year gains in August. Last month, 992 single-family homes were sold, up from 945 at the same time a year ago. Townhome transactions totaled 216 in August, up from 194 in August 2019. Overall, August 2020 sales were about on par with August 2019 sales: 1,573 to 1,580.
The residential benchmark price was $420,800, down one per cent from last year.
But while Calgary faced a somewhat different situation than other municipalities, the city is seeing a resurgence, says CREB® chief economist Ann-Marie Lurie.
“Recent national reports have shown a bounce back to new record levels over the past several months. Calgary has seen improvements over the lows recorded during the lockdowns but is far from record levels,” said Lurie in a news release. “The situation in Calgary has been slightly different as the job losses were not isolated to sectors that are typically associated with rental demand. We have started to see improvements in the job market compared to previous months as some jobs start to return.”
Does this represent a buying opportunity in the Calgary real estate market?
Canadian Real Estate: More Buyer Opportunity in the Calgary Real Estate Market
According to the latest Statistics Canada data, Calgary’s unemployment rate was the highest in the country for the second consecutive month in August. But the good news is that nearly 27,000 jobs were added last month, and the jobless rate slipped one percentage point to 11.8 per cent. The recent figures suggest that the city is on a slow but steady recovery.
What’s more, there has been increasing consternation surrounding the sight of empty commercial space and dark tower floors in Calgary and throughout the rest of the province. Although some real estate agents anticipate this to be the case for the next little while, they are not convinced that this will be the new norm.
That said, until the employment situation returns to pre-pandemic levels and the lights are turned back on within commercial premises, this could trigger a buying opportunity in the housing market since prices still sit one per cent below what they were a year ago.
CREB notes that new listings are have started to ease over the last month, which has diminished existing supply. At the same time, says the CREB chief economist, “the pace of year-over-year decline has eased as inventory levels have trended up relative to levels recorded a few months ago.” Put simply, the housing supply is picking up, and this could put downward pressure on prices if demand cannot keep up.
But the window of opportunity might be brief because Calgary is starting to see tighter market conditions in individual pockets of the real estate market. This is especially true when you consider low interest rates will inevitably draw buyers from the sidelines.
Earlier this year, the Bank of Canada (BoC) slashed the benchmark interest rate by 150 basis points to around 0.25 per cent. Plus, the central bank reduced the benchmark five-year mortgage for the third time this year to 4.79 per cent. So, whether you are a real estate investor or a homebuyer, now would be the best opportunity to take advantage of the modest downturn in Calgary real estate.
The Role of Calgary’s Diversification in its Recovery
Calgary has become diversified in recent years, relying on more than just energy to sustain the local economy. Financial services, manufacturing, aerospace, retail, and film and television are just some of the industries that have become integral to Canada’s fourth-largest city. This diversification strategy allowed the city to flourish before the pandemic, elevating the Calgary real estate market. The pandemic affected every sector, so it was no surprise that the rest of the municipal economy suffered. Now that the recovery is underway, the housing market is looking positive.