Without question 2020 has been a year of twists and turns. Personal lives, work, school, dining, entertainment and almost every form of human interaction have been affected by COVID-19.
The same can be said for Calgary’s housing market. In early March when full scale lockdown measures first came into effect, the housing market was at a standstill. In April, the volume of residential sales had fallen 63% when compared to April 2019. As the calendar rolled over into May the market showed the first signs of moving in a positive direction. Since that time, home sales have outpaced virtually everyone’s expectations.
As we near the end of October 2020, the total residential sales volume is off by less than 7% compared to year-to-date numbers for 2019. That deficiency is negligible when taking into consideration the state of affairs in March and April. Perhaps more intriguing has been the stability in pricing that some segments of the market have experienced thus far in 2020. The detached sector for example is off by less than 1% with respect to median and average pricing compared to last year.
Apartment Condo Market
Unfortunately, not all product types have preformed equally as strong in 2020. At present, the apartment market is off by over 16% with respect to year-to-date total sales compared to the same time in 2019. That equates to 353 fewer transactions. At the same time, active listings are 9% higher than last year. These two factors have contributed to downward pressure on prices with the median and average prices 8.69% and 7.50% lower respectively then year-to-date 2019 values.
The COVID Effect
When attempting to understand why the apartment market has not fared as strongly as other sectors, there are a few things to consider;
- Physical Distancing – never has the need for humans to spread out been of such paramount importance. Apartments have traditionally been built without much consideration to this requirement. Shared spaces abound. The lobby, the elevator, the hallway – these are now among the places in an apartment building where one needs to be constantly aware of their own personal space as well as that of their peers.
- The Need for Outdoor Space – when restrictions were put in place early in Alberta’s response to the pandemic, it meant many people where confined to their homes. This put a premium focus on what the home could offer. Included in that was the ability to get outside and move around. Apartments do not offer a plethora of outdoor space in most cases. Often the best that the apartment can offer is a small balcony and sometimes a shared roof-top or patio gathering area. However, many of those common areas have been off limits since the pandemic began.
- Proximity to Downtown – the large apartment towers of most major cities have constantly been built in close proximity to the financial and corporate business districts. Calgary is no exception. The draw, in part, is affordability within walking distance to work for so many business professionals. As a result of COVID, many people have been deployed remotely to work at home rather than visit the office everyday. That has negated the attractiveness of apartments for some perspective buyers who no longer value proximity to work in the same way that they did before.
- Low Interest Rates – historically low interest rates well below 2% are enticing many buyers to enter the marketplace. These low rates are also helping a lot of people qualify for a larger budget than they may otherwise have qualified for. Combined with the factors mentioned above, many buyers are taking their increased buying power into the single-family market rather than seeking out an apartment.
Outlook Moving Forward
In June 2020 the Canadian Real Estate Association (CREA) announced that there were more residential transactions that had taken place than any month in Canadian history. Ever.
Quite frankly, that is a surprising number when taking into account the economic impact that the COVID-19 pandemic has had on so many Canadians.
In it’s September real estate report, the Calgary Real Estate Board (CREB) noted that the “current conditions in the housing market are surprising”. As mentioned above, the balance of the 2020 market has surpassed even the most optimistic projections from the early Spring.
The “COVID Effect” that was so negative and persistent in the Spring has been somewhat short lived for certain sectors of the housing market.
However, this same momentum has not translated into the apartment product. CREB noted the following… “all other sectors have seen some recent year-over-year gains in sales, but this sector continues to trend in the other direction. Year-to-date sales declined by 16 per cent, the largest decline among all property types. At the same time, new listings continue to rise, which is causing further inventory gains. This is keeping the months of supply above seven months. There have been some districts showing signs of price stabilization, but overall, year-to-date prices have eased by more than two per cent, amounting to a total adjustment from 2014 highs of over 18 per cent.”
There is no single reason that the apartment market has under-performed in 2020 compared to other sectors that have had strong recoveries following the spring lockdown.
In addition to the “COVID specific” assumptions and concerns outlined earlier, the most persistent issue that has dogged the apartment market since 2014 is the Alberta economy. There is little light at the end of the tunnel currently and CREB noted as much in their September report citing the following… “unemployment levels remain exceptionally high and there is added concern regarding additional job losses coming in the energy sector. If this situation persists, it could result in weaker demand and rising listings.”
The Silver Lining
In response to the downward trend in the market, some builders and developers have temporarily shelved plans for new projects, or, have converted projects already under construction into rental inventory.
These measures will hopefully lead the way in reversing the negative trends that have been persistent in the apartment market over the past few years. The market needs to continue to evolve in order for the inventory levels and months of supply to fall to the point where prices can stabilize and ultimately begin to recover in a positive direction.
In the meantime, and while that transition is underway, opportunities abound. Savoy buyers are taking advantage of historically low interest rates and capitalizing in the marketplace. Current conditions are making the apartment market a very attractive option. This is true for those seeking an investment property, or looking to enter the housing market for the first time and seeking affordability.
