Calgary is currently among the most affordable of the major cities in Canada for real estate, which is particularly attractive given the out-of-control prices being seen in other major markets. According to a recent report, homes in Calgary are actually deeply undervalued. However, according to local realtor Jesse Davies, growth potential in the market means there is still a lot to look forward to.
According to the Calgary Real Estate Board’s (CREB) new statistics release for the month of November, the average price of a detached home in the city was $542,600, up over 10% year over year. Semi-detached homes averaged $429,800 and apartments averaged just $251,700 with the lowest year-over-year increase. In addition, despite winter being seen as a traditionally slow season for the city, according to CREB sales have remained strong at “roughly the same levels seen since August” while inventories continue to fall.
Compared to other major cities, Alberta is doing much better in terms of affordability even with continuous price gains. In October, Ottawa reported an average residential price of over $700k, while detached homes in Toronto and Vancouver both sold for well above $1.5 million on average.
Last month, a report from Moody’s Analytics revealed that real estate markets in Canada were up to 90% overvalued above-trend prices. The same expensive cities mentioned above displayed high double-digit amounts of overvaluation while Calgary was actually reported to be undervalued by up to 30%, some of the highest undervaluation in the country.
This doesn’t mean investors have lost money – home values continue to rise. Instead, this report may point to big growth opportunities for the future.
“Calgary has a very cyclical market that historically has followed the price of oil and gas,” said Jesse Davies, a top local realtor, explaining one reason for the current undervaluation in Calgary.
However, Davies says, the oil industry is no longer the only player in Calgary.
“Since the downturn, Calgary has diversified away from being so dependent on one sector and has seen job growth in tech, medical, agriculture and other sectors.”
These new sectors have plenty of room to grow in Calgary and will potentially attract many newcomers to the Calgary market, providing reciprocal benefits for both businesses and the city.
“Because of the conservative government’s policies, Calgary can be an attractive place for new or current businesses to relocate to, with attractive incentives both in lease rates and tax advantages.”
Another reason Calgary may be in a good position is mentioned in Moody’s report. With prices inflating so rapidly in other areas of the country and interest rates set to increase, the report claims that the forecast “implies a deceleration of national house price growth”. Essentially, rapid price growth is simply not sustainable as the economy shifts back into gear.
However, in areas like Calgary that didn’t fly so high, Moody’s actually predicts that these areas “will do better despite weaker economic fundamentals precisely because they have retained better affordability”.
This means not only can you find more affordable prices in Calgary now, but your investment may also be more stable in the face of coming changes.
According to Davies, “This sets Calgary up to really flourish in a recovering economy and the future. I see Calgary having a high probability of steady growth both in the short and long term. There are numerous factors at play but attractive values, the re-opening of immigration, diversification, and opportunity are a recipe for steady growth for the city.”
Davies says his clients are optimistic too, with many eager to get in now while interest rates are still low to make the most of the opportunity.]
“Among my clients, there is a sense of urgency to pull the trigger as their 90-day mortgage rate holds are set to expire. Their monthly payments can end up being substantially higher when rates go up, so they are looking to make the most of the current level of affordability.”
For those looking to buy now, Davies says there is “real opportunity” in multiple real estate segments.