Condo sales cool in summer, but will likely heat up: analyst
Condo sales slumped during the third quarter of the year, but recent data from a firm tracking the Calgary market indicate silver linings may be on the horizon for the multi-family segment.
“We saw the typical drop in sales in Q3, which is usually slower than the second quarter of the year,” says Kimberley Poffenroth, vicepresident of business development with Urban Analytics, which compiles data on the province’s real estate sector.
She says developers typically do not launch new projects, nor do they market heavily, in the summer because buyers often take a pause.
Multi-family sales for the quarter starting in July and ending in September were 715 units. That’s a 12 per cent decrease from the second quarter this year. But sales were in line with the third quarter from the past few years. Year over year, the drop was only 0.3 per cent from Q3 in 2017, or two units fewer. Still, levels are significantly below the same period in 2014. That year 1,284 units sold during Q3.
Poffenroth notes conditions seem to be improving, and the sales probably would have exceeded the third-quarter numbers from previous years had it not been for OS FI’s (Office of the Superintendent of Financial Institutions) tightening of mortgage regulations.
Starting this year, new rules require buyers with even 20 per cent down payments to qualify at the greater of either the five-year benchmark rate or their contract mortgage rate by an additional 200 basis points.
With sales still lagging, prices should remain flat going forward. That’s good news for buyers. Yet the market is also showing signs of growing demand.
“We did see a decrease in standing inventory this quarter, so that’s a good sign because it creates room for new projects to come to market.”
Poffenroth adds another positive is the launch of a concrete multifamily project, the first of its kind in more than three years.
“We’re starting to see momentum change downtown,” she says about Nude, an 18-storey, 177-unit tower by Battistella Developments, officially launched at the end of September.
Early indicators point to strength in the multi-family rental market, too, the report noted. Preliminary research suggests vacancy rates have fallen to about three per cent for new, purpose-built rental projects.
Urban Analytics will have more data on the rental market later this month, Poffenroth says.
Other signs of a strengthening market include the City of Calgary approving 14 new communities, which could add an estimated 18,000 single-family homes and 9,000 multi-family units to the market in the coming years.
Buyers will have more choice at good prices, given real estate tends “to trail the economy,” she adds.
Once labour market conditions improve, would-be buyers should have more confidence to get back into the market, Poffenroth says.
Even the industry is more upbeat.
“We get a sense of a positive vibe, and that is something new, when we’re out visiting projects,” she says. “So there is some optimism in the market.”