Price is RIGHT

Calgary Herald New Condos - - Front Page - KATHY MCCORMICK

Lori Edey is typ­i­cal of home­buy­ers who have sur­prised the res­i­den­tial construction in­dus­try this year.

She’s a young renter who has made the move to home­own­er­ship, de­spite the eco­nomic down­turn.

It all boils down to price and im­proved af­ford­abil­ity.

“I re­ally didn’t think I would be able to af­ford any­thing on my own,” says the 29-year-old le­gal as­sis­tant.

“But my par­ents saw the ar­ti­cle in the pa­per about Prest­wick Place and they checked it out. The price made it work and with the in­ter­est rates so low, it was pos­si­ble.”

Such fac­tors have buoyed sales in the multi-fam­ily hous­ing mar­ket this year, says Richard Cho, se­nior mar­ket an­a­lyst for Canada Mort­gage and Hous­ing Corp.

He sum­ma­rized this year at the re­cent Hous­ing Out­look Con­fer­ence. “We are see­ing strong de­mand at the en­try level,” says Cho.

The re­sale mar­ket shows that so far this year, more than 70 per cent of MLS condo sales have been units priced be­low $300,000. “Sales of con­dos $200,000 or less have in­creased al­most four times over last year,” says Cho. “That’s a pretty good op­tion for first­time buy­ers and we’re see­ing strong de­mand from renters.”

Edey’s new com­plex, Prest­wick Place by Cardel Lifestyles, has one-bed­room units start­ing be­low $260,000.

The com­bi­na­tion of his­tor­i­cally-low mort­gage rates and de­creased car­ry­ing costs has prompted peo­ple to jump in.

Due to the cost dif­fer­ence of con­dos ver­sus sin­gle-fam­ily homes, the multi-fam­ily sec­tor is the first place peo­ple turn, says Cho.

“There’s a strong im­prove­ment in af­ford­abil­ity — al­most $500 a month for con­dos (this year com­pared to last),” he says, “That’s like get­ting a big wage in­crease.”

With a typ­i­cal 10-per-cent down pay­ment and an av­er­age five-year fixed mort­gage rate, the av­er­age monthly pay­ment at the end of 2007 and beginning of 2008 for a condo was just over $2,000 per month.

It’s now closer to $1,500, says CMHC. By com­par­i­son, rents for the same pe­riod were $962 less per month than mort­gage pay­ments in late 2007.

To­day, the dif­fer­ence is only $426 — and buy­ers are build­ing eq­uity at the same time.

Mort­gage rates fell over the course of 2009, but are ex­pected to re­main rel­a­tively sta­ble for the rest of the year, says Cho.

The av­er­age fiveyear rate is 5.55 per cent, com­pared to an av­er­age of 7.06 per cent last year. One-year rates are av­er­ag­ing just 4.03 per cent.

For Edey, the fact that her con­do­minium build­ing won’t be com­pleted un­til 2011 is an­other plus. It gives her time to save so she will be ready fi­nan­cially when the time comes to make the move, she says.

All the cur­rent ad­van­tages of own­ing have at­tracted peo­ple to the mar­ket, sur­pris­ing even builders.

“Our fore­cast for this year was a mod­est 79 (sales),” says Tim Lo­gel, pres­i­dent of Cardel Lifestyles. The com­pany is build­ing Prest­wick Place, where Edey bought, as well as other mul­ti­fam­ily de­vel­op­ments.

“We will end 2009 with 145 sales,” says Lo­gel. “The in­crease is di­rectly a re­sult of pent-up de­mand, the low in­ter­est rates and at­trac­tive pric­ing.”

Other multi-fam­ily de­vel­op­ers found the same thing. “We ac­tu­ally had a very good year,” says Wendy Jabusch, gen­eral man­ager of Hawthorne Homes.

“We set our 2009 busi­ness plan at 159 sales and achieved 180 year-to-date. Over the last year, our buy­ers took the time to re­search and make a care­ful se­lec­tion for their homes, but ul­ti­mately they rec­og­nized the value and had the con­fi­dence to make a pur­chase.”

States­man Group is an­other com­pany which is build­ing in Cal­gary, along with other lo­ca­tions,

“In our mar­ket, we have found that peo­ple know value when they see it,” says pres­i­dent Garth Mann, “They want to be treated with qual­ity prod­uct, a great lo­ca­tion, ameni­ties that are al­ready con­structed and the op­por­tu­ni­ties of the value in­creas­ing.”

His com­pany has al­ready moved in nearly 100 peo­ple into River­side Quays, States­man’s lat­est steel-and­con­crete com­plex in In­gle­wood.

Even with the un­ex­pected strengths, the condo mar­ket is still in tran­si­tion, says Cho.

“Af­ter start­ing 7,051 multi-fam­ily units in 2008 — the high­est level of pro­duc­tion since 1981 — multi-fam­ily construction has re­ported sharp de­clines thus far into the year,” he says.

By the end of Septem­ber, just 987 units were started, the low­est level since 1996.

Cho is call­ing for 1,350 mul­ti­fam­ily construction starts by the end of the year, in­clud­ing row houses, apart­ments and semide­tached homes — down 81 per cent.

“Height­ened sup­ply lev­els con­tinue to dis­cour­age ad­di­tional multi-fam­ily pro­duc­tion,” he says. “Much of the de­cline in starts has been con­cen­trated in the apart­ment seg­ment, where in­ven­to­ries have been ris­ing in 2009.”

That will con­tinue, with more than 5,000 apart­ment units still in the construction phase.

“There are still sev­eral projects around the Belt­line area that have been de­layed and halted,” says Cho.

“Many of th­ese need to be­gin mov­ing be­fore builders sig­nif­i­cantly start any new projects. Th­ese rep­re­sent a fu­ture sup­ply.”

Trico Homes, which re­cently started its 212-unit Mi­lano project in the city’s north­west, says out­ly­ing ar­eas con­tinue to have suc­cess.

“The multi-fam­ily projects that re­main over­sup­plied are mostly in­ner-city projects, which pro­vided us with enough com­fort level to pro­ceed with Mi­lano,” says Paul Betts, who looks af­ter mar­ket­ing for Trico. “I would still ex­pect some de­lays in bring­ing on new in­ner-city projects and de­vel­op­ers await more sig­nif­i­cant signs of a re­turn to mar­ket readi­ness for prod­uct.”

The fact that some projects in the in­ner city have been side­lined is a good thing, says Randy Klap­stein, pres­i­dent of Pointe of View, which builds both in the in­ner city and out­ly­ing ar­eas.

He has just started to re-mar­ket and build the stalled Mid­town highrise project, which was halted when its for­mer de­vel­oper went into re­ceiver­ship.

“The good news is that not all the de­vel­op­ment that was planned for the down­town core was built,” says Klap­stein. “I think that the ones that did get build now have in­ven­tory mov­ing down.” That’s good news, he says. “I think the down­town can han­dle two or three de­vel­op­ments a year — not the 20 or so that were planned,” he says. “The down­town of­fers a very vi­able, great life­style and peo­ple are def­i­nitely ex­cited about it.“

He’s al­ready ex­pe­ri­enc­ing strong in­ter­est in Mid­town and has about 90 sales to date de­spite just open­ing the sales cen­tre.

Adds Calvin Buss, who spe­cial­izes in mar­ket­ing some in­ner-city projects un­der Buss Mar­ket­ing: “The in­ner city has an in­ven­tory is­sue as big highrise build­ings are still in the de­liv­ery stage.

“Large projects such as Key­note are still mov­ing ahead with de­liv­ery next year and ones side­lined — such as Mid­town and pos­si­bly oth­ers — have and are re­turn­ing to the mar­ket.”

Sev­eral in­ner-city de­vel­op­ers have come up with price re­duc­tions and in­cen­tives to at­tract peo­ple to the dif­fer­ent projects that are un­der­way and they have met with some suc­cess.

Over­all, says Cho, “we are start­ing to see some signs of things get­ting bet­ter.”

Lor­raine Hjalte, Cal­gary Her­ald

First-time buyer Lori Edey pur­chased a unit in Prest­wick Vil­las.

Cal­gary Her­ald Archive

Down­town can sup­port one or two multi-level construction projects.

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