Metro Calgary Home Price Forecast
HIGHLIGHTS
Home values in Metro Calgary have been rising since January of this year. However, there are mixed signals in the detached house market while the condo apartment market continues to be red hot.
In comparison to recent years, Calgary’s house purchase demand is middling while apartment demand has skyrocketed.
A multi-factor analysis identifies Metro Calgary as a high-risk real estate market. Keep reading to find out why.
Budgets for home purchases are under strain due to the significant increase in mortgage rates since their historical lows.
This article covers:
What is the current state of the property market?
Where are prices headed?
Should investors sell?
Is this a good time to buy?
1. What is the current state of the Calgary property market?
Home Price Overview
Metro Calgary has a population of roughly 1.6 million and was ranked 65 of the world's best 100 cities.
The pandemic turbocharged the Metro Calgary housing market, driving up prices at a remarkable pace and causing aspiring homeowners to be pushed further away from their dreams. And just when they thought things couldn't get trickier, rising interest rates now force even more potential buyers to sit on the sidelines.
Yes, prices are rising again, but it’s not a result of more buyers - it’s the result of fewer sellers.
For those contemplating selling their homes, time might be of the essence. Home values in many areas of Metro Calgary dropped double digits from the 2022 peak. While prices have been rising so far this year, there are mixed messages in the data, and the recovery might stall in the summer. Current conditions are leaving everyone uncertain about when markets will stabilise.
On the other hand, prospective homebuyers might consider waiting for a lighter mortgage burden. Mortgage rates are relatively high. Unfortunately, patience will be needed because rates are anticipated to remain high until 2024.
The market fundamentals are riddled with risk and uncertainty as consumer sentiment has taken a substantial hit. But remember, consumer sentiment can be volatile and unreliable predictor of future price trends.
Metro Calgary Detached House Prices
Calgary house prices are exploring uncharted territory. While the benchmark price continues to rise, the median price has lost momentum. That means fewer people are buying the more expensive homes, and most are not buying a “benchmark home”. Government intervention successfully shielded the real estate market from the pandemic-induced recession, but now higher interest rates are weighing on the market by reducing people’s home-buying budgets.
We believe politicians are hoping to guide the market toward a typical annual real estate cycle with price growth in the range of 1 to 3% annually – in line with income growth.
Whereas many people want to buy a home, affordability is very low, and this is reflected in the number of successful purchases. Significantly fewer people can realise their homeownership dream in these market conditions.
At the same time, homeowners are unwilling to sell. Why?
1. Peak Price Anchored: Potential Sellers Anchored to Previous Peak
Potential sellers think their home is worth more than its current price on the market, so they’re waiting in the hopes that prices will rise to the peak values of Spring 2022.
Even though, technically, a home is only worth its current value on the market, people fundamentally don’t feel that’s true. This phenomenon is called anchoring.
2. Trapped: People Can’t Qualify for a New Mortgage
Families that want to upgrade to a larger home can’t qualify for a new mortgage at the current rates. If they can’t buy something new, they will not sell their old home.
3. Opportunistic Landlords: Strong Rental Market
Typically, when people right size their housing (e.g., bigger home for a family, smaller home for empty nesters), they sell the home and buy a new one. However, the rental market is so strong that many potential sellers have been tempted to rent their old homes instead.
Metro Calgary New Construction Home Prices
Prices of new homes have shot upward since May 2023. Based on economic fundamentals, they might hit a ceiling soon.
Does this concern you? Read the Pros and Cons of Buying Pre-sale Homes
There is a record number of homes under construction.
Market Risk
Based on Mortgage Sandbox Analysis, Calgary is at high risk of a significant market correction.
Metro Calgary Condo Apartment Prices
Metro Calgary condo apartment values are rising at a fast pace. A December 2022 CBC news report said that Calgary has attracted the attention of many Ontario real estate speculative investors. Our-of-province investors are attracted by lower price-to-rent ratios and landlord-friendly tenancy laws.
With more people working-from-home, we expect developers will begin marketing larger (i.e., 2 and 3 bedrooms) apartments to meet buyer preferences. As the supply of more generous floor plans comes to the market, it may depress the values for small floor plan condos.
At Mortgage Sandbox, we would like developers to build 4 and 5 bedroom condos because:
Not everyone can afford to buy a house for their family.
Canadians who now work from home need more room to segregate workspace from living space within their homes.
Many Canadians with longer working hours find it challenging to stay on top of necessary house upkeep (i.e., mowing lawns, clearing eaves, shovelling sidewalks).
Many people prefer to live in higher-density neighbourhoods with all the essential amenities within walking distance.
Very affordable for first-time homebuyers
Even in the current market conditions, a condo is well within reach for most Calgarians. A homebuyer household earning $99,000 (the median Metro Calgary household before-tax income) can get a $425,000 mortgage. That’s more than enough to buy a benchmark condo, but a house purchase is moving out of reach for most locals.
What about the rest of the West?
Read the Edmonton Home Price Forecast, Vancouver Home Price Forecast Forecast, and Okanagan Valley Home Price Forecast.
2. Where are prices headed?
There is a lot of uncertainty in the forecasts for 2022 and 2023. Many of the forecasters we've surveyed have different expectations for:
Will the federal government achieve its aggressive immigration targets?
How much will interest rates rise? How long will they stay this high?
There is no consensus among economists. Market sentiment and government stimulus have led to price acceleration and record home purchases even though most economic fundamentals have faltered.
How do we arrive at our forecast range? Check out our full assessment of the five factors that drive these forecasts. These five forces help explain why several forecasters are anticipating price drops.
At Mortgage Sandbox, we provide a price range rather than attempting a single prediction because many real estate risks can impact prices. Risks are events that may or may not happen. As a result, we review several forecasts from leading lenders and real estate firms, and we then present the most optimistic estimates, the most pessimistic predictions, and the average forecast. Would you like to learn more about real estate risk? We've written a comprehensive report explaining the uncertainty level in the Canadian real estate market.
Our forecast inputs:
3. Should you sell your Calgary home?
From a seller’s perspective, more future market changes influence prices downward, so now may be a better time to sell than in two years, and the annual real estate cycle usually favours sellers in the first half of the year.
Sellers should always consult a mortgage broker early to prioritize flexible loan conditions and reduce the risk of mortgage cancellation penalties. Find out more about the benefits of a mortgage broker.
Planning to Sell? Check out our Complete Home Seller’s Guide.
4. Is this a good time to buy a Calgary home?
It’s hard to say, prices have been falling, but interest rates are projected to rise, which means prices could fall further. It's almost impossible to time the market. If you are buying your forever home and don't plan to sell for 10 years then the risks of buying now are lower.
Regardless, the annual real estate cycle usually favours buyers in late summer.
If you are considering buying, be sure to drive a hard bargain and pay as close to market value as you can. Also, when it comes to financing, don't bite off more than you can chew.
Are you planning to Buy? Check out our Complete Home Buyer’s Guide so we can walk you through the end-to-end process and get you ready to buy your new home!
Recent Real Estate News
Here are some recent headlines you might be interested in:
Posthaste: Canada's housing market is hot again — expect it to stay that way, economists say (Financial Post)
Friction upon reentry: Three landing scenarios (KPMG Economics)
Posthaste: Canada's housing market is showing green shoots, but something is missing (Financial Post)
Banks seek workarounds to avoid mortgage default for struggling variable-rate borrowers (Financial Post)
Larger investors dominate condo ownership in smaller cities in Ontario and B.C. (The Globe & Mail)
Interest rate hold could add heat to real estate markets: mortgage experts (BIV)
More than half of GTA condo investors losing money on properties, says new report (CBC)
Private mortgage lenders refusing to renew loans to borrowers (The Globe and Mail)
Richmond developer allows buyers to move in today, pay mortgage in two years (Richmond News)
Rising rates are exposing weak spots in the financial system and the next flashpoint could be real estate (Financial Post)
Immigration fuels Canada's largest population growth of over 1 million (BBC News)
Housing affordability - first improvement in 2 years (National Bank of Canada)
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