Multi-family homes market adjusting to the new reality
Calgary's new multi-family homes market — rental, townhome and condominium — has muddled through major economic headwinds so far this year, but held its own thanks to a focus on affordability, a new report has found.
Urban Analytics released its Alberta State of the Market, Q2-2020 report last week providing a comprehensive snapshot of the province's new multi-family market.
And Calgary showed pockets of resilience despite many challenges, says report author Jackson Cornelius, market analyst and advisory lead Alberta at Urban Analytics.
“Townhomes have been driving the majority of the (multi-family) market,” he says, adding that most sales are in the outer areas, including bedroom communities such as Airdrie and Cochrane, where prices tend to be more affordable.
In fact, outer sales accounted for 79 per cent of all multi-family sales in the Calgary region from April to the end of June. Sales of townhomes made up about 57 per cent of the total. But they did fall slightly from 289 in the first quarter (Q1) to 269 for the city in Q2.
And sales from April to June this year were a far cry from the same period last year when 378 units sold — to be expected given April and May were locked down due to the pandemic, Cornelius says.
By comparison, wood-frame condo sales grew by four per cent in Q2 (167 units) from Q1 (160 units). Again, the figure was significantly below the same period last year when 256 units sold.
Concrete-built apartment sales fared the worst, falling 27 per cent quarter over quarter, after excluding one bulk deal that saw 155 units sold in Q1, which was an outlier.
All told, the city saw 36 concrete-built sales in Q2, down from 55 units in Q1, and a steep drop from the 96 sales in Q2, 2019.
Developers are taking note and, “putting a pause on permits,” says Cornelius.
One reason for the slowdown, he adds, is economic drivers have fallen off this year not just from the pandemic. It's an ongoing challenge from the energy slump, which started in late 2014.
Although oil and gas prices have been ongoing concerns, they were exacerbated by the pandemic.
Prices have since improved, but job growth — another real estate driver — has struggled. The report notes in Q2, employment in the province fell by more than 200,000 compared with the same quarter in 2019.
With the tough economic conditions, many developers are bringing more purpose-built rentals to market.
“A big chunk of the purpose-built rental market in Calgary is driven by the Beltline,” says Cornelius.
He adds the growing selection has driven down rent in downtown from $2.44 to $2.29 per square foot. That's still above the city average of $2.08 per square foot in Q2 2020, which is down slightly overall from $2.10 in Q2 last year.
The decrease in rent reflects growing vacancy among new projects, which averaged 16 per cent over the three months ending June 30. The report shows that's almost double the same period in 2019.