Hailed four years ago as leading Canada’s hottest housing market, Calgary condominium developers are now facing the highest unsold inventory in 16 years as low oil prices sink sales in Alberta’s biggest city.
After years of rapid construction, Calgary now has more than 800 new and unsold condo apartments, the highest level since 2001, according to the Canada Mortgage and Housing Corp. (CMHC).
And the condo inventory is rising. As of the end of 2016, the City of Calgary had received 27 development permit applications for a further 5,100 units. In 2015, more than 5,000 condo apartments were started, many of which are now hitting the market.
Meanwhile, the benchmark price of a resale condo apartment has fallen nearly 5% from January 2016, reports the Calgary Real Estate Board, to $269,000, and apartment sales are down 30% from two years ago.
According to Calvin Buss, principal of Buss Marketing, which specializes in new condominium projects, several Calgary developers have found they can’t charge high enough prices in the current market to make their projects economical. Buss said that three out of four condo projects that have come across his desk in recent months have been converted to rental developments.
But Calgary’s slumping rental market offers scant shelter, said Shamon Kureshi, president and CEO of Hope Street Real Estate Corp., a major Calgary property management firm.
“Times are hard for every single landlord with whom I’ve spoken in the past eight to 12 months. Empty rental properties abound, and no obvious solution to the province’s empty rental property phenomenon exists.”
Kuershi added that his company’s research of smaller rental properties shows that 37% of Calgary’s rental units are empty, or nearly 3,000 vacant units.
This is dramatically higher than the 7% apartment vacancy rate that CMHC reported in October of last year, which the agency said was the highest level in 25 years.
CMHC’s annual rental report also showed that Calgary’s average rental rates are falling while the number of purpose-built rental units increased by 1,296 units in 2016 from the previous year to 36,523 units – the highest annual gain since 1994. CMHC said two-bedroom units are renting, on average, for $1,258 compared with $1,332 a year earlier. But Western Investor easily found two-bedroom downtown Calgary apartments offered for less than $1,100 this week.
Landlords are getting nailed, Kureshi said.
“These [vacant] homes show an average rental rate of $1,477, therefore private Calgary landlords [cumulatively] are losing $4,431,044 per month or $147,700 per day - based on the current economic climate and rental market.”