Emerging Trend in Calgary's Property Market Cloud the Forecast
As Calgary’s skyline continues to evolve, so too does its property market, presenting a challenging landscape for analysts attempting to predict the city’s real estate trends for 2025 and 2026. Metro Calgary has long been a unique player in Canada's housing scene, benefiting from a mix of affordability, economic opportunity represented by the oil patch, and a rising population. Yet, recent developments have muddied the waters, introducing a higher level of uncertainty.
The current state of Calgary’s property market is perplexing, with home values seemingly hitting a plateau over the summer of 2024, followed by subtle but noticeable shifts in both supply and demand. Some emerging trends suggest that prices may be cooling off, but this is far from certain.
As we head into 2025, Calgary faces a perfect storm of factors—economic, social, and market-based—that make forecasting the future of its housing market particularly difficult.
A Pandemic Legacy Meets Higher Mortgage Rates
Calgary, like many other Canadian cities, experienced a surge in housing demand during the pandemic. As families sought more space and investors flocked to capitalize on booming markets, prices skyrocketed.
However, what made Calgary different was its relatively affordable housing, which attracted buyers not only from within the city but also from other provinces, notably Ontario and British Columbia.
Demand combined with a lag in supply pressurised the market, leading to an acceleration in home prices. Buyers were met with fierce competition for available homes, driving prices higher.
However, we now see that in late 2024, the supply of active listings is on a steep upward trajectory, potentially depressurising the market for buyers and reducing upward price momentum.
Why is supply rising?
After the pandemic housing market boom, the market was hit with mortgage rate hikes. Rates rose from below 2% to over 6%, cooling demand as buyers grapple with higher mortgage costs.
From a demand standpoint, higher mortgage rates have particularly profoundly affected first-time buyers, many of whom have found themselves priced out of the detached home market. Mortgage rates are expected to drop in 2025, allowing more buyers to re-enter the market as their budgets grow.
On the supply side, many existing homeowners who bought during the pandemic have found their current homes too expensive now that their mortgages are due for renewal. Many choose to sell, take their equity gains, and reduce their monthly cost of living. This is a likely explanation for the steady growth in active listings.
Detached Homes vs. Condos: Diverging Markets
One of the most notable trends that emerged in 2024 is the divergence between Calgary’s detached home and condo markets. Traditionally, Calgary’s housing market has been dominated by detached homes, but in recent years, the condo market has gained traction. In fact, condos now represent the stronger segment of the two, but even this growth is showing signs of slowing.
The demand for detached homes has waned, partially due to higher prices and shifting preferences. Buyers increasingly turn to condos as a more affordable alternative, especially as they face the double burden of elevated home prices and higher mortgage rates. Yet even the condo market, once seen as a refuge for those priced out of detached homes, has lost some of its steam.
A key factor believed to be driving this trend is out-of-province investor activity. With their lower price points and relatively high rental yields, Condos have been particularly attractive to investors, especially those outside the province. Calgary offers a significant rental income advantage over cities like Vancouver and Toronto, where property prices are much higher and rental yields lower. However, as condo prices rise, more units come onto the market, and as mortgage rates squeeze both buyers and investors alike, there are signs that this demand may be slowing.
New Housing Stock and Political Ambitions
Calgary’s real estate market has long been defined by an imbalance between supply and demand. While demand surged during the pandemic, supply lagged behind. Now, that dynamic is starting to change. Calgary is seeing a record number of housing starts, and developers are racing to complete projects in anticipation of softening demand. As these new homes hit the market, they could further ease the supply shortage that has been a defining feature of Calgary’s property market in recent years.
But there’s a catch. Weakening demand might not provide enough buyers to absorb all the new homes being completed, at least not at current prices. While it’s early days, the Calagry new construction home price index is showing signs of weakeness.
This potential supply glut poses a significant risk to the market, especially if it coincides with a further drop in demand. The autumn months of 2024 have already seen some cooling, and while this is typical for the time of year, if that trend continues into 2025, Calgary could be facing the prospect of a market correction.
This introduces a sense of urgency for sellers. Those considering selling their homes may want to act quickly to capitalize on current prices before they soften further.
The Role of Immigration and Labour Market Dynamics
Another variable adding complexity to Calgary’s market forecast is immigration. The federal government’s aggressive immigration targets have been a boon for the city’s housing market, as new residents create demand for both rental properties and homes. Calgary’s relatively affordable housing and strong job market have made it an attractive destination for newcomers to Canada, helping to prop up demand even as local buyers are squeezed by higher mortgage rates.
However, it is uncertain whether this influx of new residents will continue at the same pace. The city’s ability to accommodate this growth, particularly in terms of housing supply, meaningful employment, and infrastructure, will be critical to its long-term sustainability. Alberta’s population is growing faster than its ability to create full-time jobs. As more people compete for fewer job openings, we can expect the political pressure will mount, asking the government to reduce immigration targets to a more moderate level.
On the labour front, Calgary has fared worse than many other Canadian cities. Energy continues to play a significant role, but the city is increasingly positioning itself as a hub for tech and innovation. This diversification has helped create jobs and attract new residents, but it also adds another layer of uncertainty to the market. If Calgary’s economic diversification efforts falter, or if global energy markets experience turbulence, the city’s real estate market could suffer.
Investor Uncertainty
Investor activity, a key driver of Calgary’s housing market in recent years, could become a double-edged sword. While investors have flocked to the city for its higher rental yields, they also introduce an element of volatility. If rental prices begin to soften or the broader Canadian housing market experiences a downturn, these investors could pull out of Calgary, exacerbating price declines. Unlike owner-occupied property, investor-owned properties are expected to provide good investment returns. If future returns look shaky, investors will likely cash in any accumulated profits or reduce their losses by selling the property. This ability to ‘take it or leave it’ means that high concentrations of investors in a property market make it more volatile.
Calgary's rent growth was astronomical a few years ago, but it has stalled in 2024. Tepid rent growth and wavering price gains will likely cause many investors to reevaluate whether to hold for the long run or sell and reinvest elsewhere.
The Risk of a Correction
The risk of a market correction is real. Based on current data, analysts classify Calgary as a high-risk market, with supply and demand imbalances and high mortgage rates creating conditions ripe for a price adjustment. Whether this correction will occur in 2025 or later remains uncertain, but the possibility has certainly captured the attention of both investors and homeowners alike.
Uncertain Outlook: The Challenges of Forecasting 2025
As we look ahead to 2025 and 2026, it becomes clear that Calgary’s real estate market is in flux. High mortgage rates, high levels of construction in the pipeline that developers will complete in 2025, investor behaviour, and affordability concerns are all pulling the market in different directions. External factors such as federal immigration policy and global economic conditions add further uncertainty.
This creates a dilemma for homeowners: Should they sell now to lock in gains or hold out in hopes that the market will continue to rise?
The question is equally challenging for prospective buyers: should they wait for mortgage rates to drop and risk being priced out of the market, or buy now and potentially overpay in a cooling market?
Investors, too, face a difficult decision: While Calgary continues to offer attractive rental yields compared to other Canadian cities, the prospect of a market correction could diminish the appeal. The city’s market is no longer the predictable bet it once was, and the downside risk is becoming harder to ignore.
In the end, the one thing that is clear is that predicting the future of Calgary’s housing market has never been more difficult. For now, all eyes are on 2025, a year that promises to be pivotal in determining the trajectory of the city’s real estate landscape. Whether the market will stabilize, correct, or continue to rise remains to be seen, but one thing is certain: Calgary’s housing market is entering uncharted territory.
As analysts scramble to make sense of the emerging trends, homeowners, buyers, and investors will need to proceed with caution, keeping a close watch on the market as it evolves in the months to come. The only certainty in Calgary’s property market is uncertainty itself, which makes forecasting the year ahead such a complex task.
