A cooling trend is setting into the key housing markets in Alberta, which last year sizzled with a heat powered by the province’s economic growth.
But softened commercial markets could be ready to renew their growth.
The market for resale houses in Calgary should be more balanced in 2003 than it was last year, says the president of the Calgary Real Estate Board.
However, the pace of sales is unlikely to match the record set in 2002, said Rosalee Krygier.
The average price of houses and condominiums should both go up about 3.5 per cent, she said. The average price rose 8.8 per cent in 2002, ending the year at $198,057.
There are also now more listings on the market, compared to 2002 when real estate agents found themselves short of inventory all year long.
Sales of existing residences in Calgary hit an all-time record of 25,054 in 2002, up 11 per cent from 2001’s level. This year probably won’t see a new record, she said, estimating that Calgarians will buy 23,500 used houses and condos.
Condominiums are about 25 per cent of the market. Anything over 20,000 sales in a year is a strong market, Krygier said.
And sales of investment property should be strong as people look for a safe haven from the carnage in the stock market.
“People have more faith almost in real estate than they do in the stock market,” Krygier said.
The beginning of the year saw an increase in new listings in the resale market, according to CREB figures. They totalled 3,354 units, more than double the December figure of 1,622 and up almost 14 per cent from 2,950 units in January 2002. Total active residential listings numbered 4,412 at the end of January, up from 3,684 active units at the beginning of the month.
Sales in January numbered 1,640, up from December’s 1,309 but down 10 per cent from 1,827 a year ago.
The average combined residential sale price in January 2003 was $208,999. That’s a slight decline from $210,330 the previous month but up about 10 per cent from $189,322 in January 2002.
The median price last month was $188,000, the same as in December and up from $174,500 in January 2002.
The Calgary office market softened in 2002, but a major commercial brokerage is expressing cautious optimism for 2003.
The vacancy rate was 11.2 per cent at the end of the year, up from 7.3 per cent a year earlier, Royal LePage Commercial Inc. said in a market overview. Rents softened over the year as well. At the same time, the gap is narrowing between available space and vacant space, said Alex Brough, vice-president and general sales manager in Royal LePage’s Calgary office.
Leasing momentum picked up in the fourth quarter of last year. The rising vacancy rate may have peaked, although the real story on vacancies may be told in the first- or second-quarter figures for this year, he told a recent outlook session for business.
The availability rate indicates what the actual vacancy rate is likely to be in a few months. When the availability rate declines, the market has turned the corner, he added in a later interview – a scenario which might already have happened in the suburban market.
“My gut tells me that the second quarter will tell,” Brough said.
A third of the vacant space downtown is in the sublease market, mostly attributable to the merger-and-acquisition wave in the oilpatch and the weakness in the technology industry.
The downtown office market was 10.8 per cent vacant at the end of 2002, and 12.3 per cent available. The Beltline ended the year with a 13.3-per-cent vacancy, and the suburban office market with 11.7 per cent.
The Calgary industrial real estate market was stable in 2002, at 5.2-per-cent vacancy. Sublease vacancy rose to 21 per cent from 12.8 per cent.
In Edmonton, the downtown office market suffered in 2002, and not much change is expected in 2003, according to CB Richard Ellis Alberta Ltd.
But the industrial overview from that brokerage calls 2002 another strong year for Edmonton industrial real estate, with more good news expected this year.
“Industrial and suburban office is what drives this market,” said Dave Young, vice-president and Edmonton manager for CB Richard Ellis.
Edmonton has 70.6 million sq. ft. of industrial space and has absorbed about a million square feet a year for the past five or six years. It ended the year with a four-per-cent vacancy rate.
By contrast, Edmonton’s downtown boasts 13 million sq. ft. of office space.
Agents leasing industrial space are actually short of product, and some speculative building is going on, said Young.
House sales in Edmonton should be about the same as last year, said the president of the Edmonton Real Estate Board.
Dave Schroder said 2001 was a record year in Edmonton, with 15,619 sales.
Last year just missed that mark by 2.9 per cent, due to lack of listings.
Homebuyers in the capital city started off this year with 973 purchases, down 7.7 per cent from the record set in January 2002.
New listings numbered 1,701, leaving a healthy inventory of 2,618 homes at month-end. The average price for a single-family home last month was $175,418 and the median was $168,000.
Schroder told Business Edge that he expects prices to rise seven to nine per cent this year, after rising 13 per cent in 2002. It’s a hopeful sign of a balanced market.
In-migration, low rental vacancies and rising rents, low interest rates and strong capital investment in the region will all influence the housing market. Renters who can scrape up a down payment may find their housing costs lower if they buy, he said.
“A young couple just called me,” he said. “They’re just sick of renting, facing the rent increases and not building any equity.”
The market for new housing should cool off in both major cities, according to Canada Mortgage and Housing Corp. market analysis.
“They raised the bar for us in 2002 with a new record for singles,” said Richard Corriveau, senior market analyst for CMHC in Calgary.
The Calgary census metropolitan area should have the fourth-best year on record for single-family houses this year, and the third-best year in 20 years for multi-family units.
“Those are still fantastic numbers, but they’re in comparison to an extremely strong 2002,” he said.
Interest rates should rise in 2003, net migration will be lower and resale housing may increase with more listings. Last year put pressure on prices and labour, and pushed possession dates back, Corriveau said.
In the Edmonton region, senior market analyst Richard Goatcher predicted a 20-per-cent drop in new housing, but said it would follow a 60-per-cent jump in 2002. Much of last year’s investment in Alberta real estate originated outside the province, he said.
