Condo sales cool in sum­mer, but will likely heat up: an­a­lyst

Calgary Herald - - NEW CONDOS - JOEL SCH­LESINGER

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.”

BAT­TIS­TELLA DE­VEL­OP­MENTS

An artist’s ren­der­ing of Nude by Bat­tis­tella De­vel­op­ments.

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