Calgary, the third largest municipality in Canada, continues to be a competitive alternate to Toronto and Vancouver among real estate buyers and investors. Buyers are witnessing economic development in the city as there is easier access to real estate projects and higher cap rates.
For example, as of the third quarter of 2017, cap rates for the apartment sector, specifically high rise dwellings, can be anywhere between 4.5% to 5.25%. Meanwhile, cap rates for low rise apartments are between 4.75% to 5.5%. And for downtown and suburban offices, cap rates range from 5.25% to 8.50% and 6.25% to 8.25%, respectively.
As of December 2017, housing starts in the Calgary Census Metropolitan Area (CMA) increased by 24.8% from the previous year. From 2016 to 2017, single-detached starts increased by 18.7%, and single-family starts also increased by 26.8%.
Housing completions are also rising in Calgary. According to the Canada Mortgage and Housing Corporation (CMHC), 1,361 units were completed in December 2017, which is up by 95.8% compared to the 695 completed units in December 2016.
However, due to higher interest rates, additional mortgage criteria, and more inventory in the market, it is predicted by the Calgary Real Estate Board that the housing market in the city may remain unchanged despite the economic rebound in 2017. Housing units are selling 3.5% slower in January 2018 compared to its sales performance the previous month. The price of residential units are more expensive by 3.8% compared to the prices in December 2017. Moreover, on a year to year comparison, homes are selling even slower at 13.2%, and residential units are 0.3% more expensive today than last year.
In terms of absorption rate, residential units stay an average of 60 days in the market as of January 2018, which is 13.2% longer than it was a year ago. Active listings also increased by 12.5% compared to the same month last year. This increase in active listings may be influenced by higher prices and lesser active buyers in the city’s housing market.