Calgary Condo Market Outlook for 2009

Arriva Towers, Web: http://www.arrivacondos.com

Are you thinking of buying or selling a condo in Calgary? Enhance your decision-making with the latest information on Calgary condos.

According to the CMHC, as of October 2008, there were 7411  apartment + other  units under construction.  (see dwelling type definitions at end of article)

That does not include the 2,777 Single-detached, 684 semi-detached, or the 1,002 Row dwellings – which brings the total to 11,872 homes currently under construction in Calgary.  (Source: CMHC Housing Information Monthly,  November 2008, Pg. 19, Table A5-1)

You have to take into account how many of those units are pre-sold. And of those that were pre-sold, how many were purchased by speculators intending on resale. (Remember, these projects began months or years ago when market conditions were much different)  In the past, projects would go ahead with just half of the units pre-sold. That number now is closer to 75 per cent, meaning getting projects off the ground has become much more difficult. Source

“As for new construction I think, definitely, the market got ahead of itself a bit. So now we’re seeing a correction. It might mean some projects are delayed. It might even mean some are cancelled,” said Todd Hirsch, senior economist with ATB Financial. “But this is part of the normal kind of correction mechanism that takes place in a market when things get a little ahead of themselves.” 

He continues, “We’re in a market that has slowed from the peak and . . . the biggest oversupply situation we’re seeing in Calgary’s residential market is the condo side.” (Source)

The recent RE/MAX Housing Market Outlook 2009 echoes the same sentiments stating, “Calgary’s high-rise condominium market, propped-up by speculation in recent years, is more vulnerable to new market realities. Thousands of new units are expected to come on-stream in 2009, which could create a glut of listings. Some developers have already moved to mitigate their losses by stopping new projects.”  (Source)

Condo Projects Cancelled

This over-supply of condos has caused developers to either delay or stop construction on their projects. 

  • Gateway Midtown One
    Gateway Midtown

    Gateway Midtown

     515 – 10th Avenue S.W.
    26 Floors 
    Status: Suspended.   Construction Began: 2006
     
  • Gateway Midtown Two
    517 – 10th Ave S.W.
    30 floors
    Status: Suspended.  Construction Began: 2006

Resiance Corporation, suspended construction because of rising costs.  Spokesman Shael Gelfand says, “It’s with deep regret we announce, at least temporarily, Gateway Midtown has gone into suspension. It’s primarily due to rising costs for labour and for materials. It’s just made it too expensive.”

The decision affects a lot of buyers and investors. More than 500 of the 650 units have been sold. Their deposits are now being held in trust at a lawyer’s office until a decision is made whether to proceed with the project.  (Source)

  • Skytower
    1110 – 1st Street S.E.
    Status: Suspended.  Construction Began: 2006

“Skytower, at 10th Avenue and First Street S.W. has yet to come out of the ground and there’s speculation the project will morph into an office building or parkade.” 

Update, December 5thResidents fear abandoned Skytower project causing structural damage (Calgary Sun)

  • Manchester Station
    3rd St & 55th Ave SW

Only 28 of the 99 units have been sold. Todd Gow, a spokesman for Condo Source Corporation, says the project is only on hold. 

Some developers have told CBC News another half-dozen large condo projects are at risk. (Source)

Update:  January 31, 2009 – Calgary Herald
Market Stalls Condo Project

“A Bridgeland condo project, once hailed as a shining example of inner-city development, is being put on hold because of the falling real estate market.

The first condos in the Crossings at the Bridges, a 142-unit project that’s part of the landmark Bridges development, were due to start being sold in February, with construction to follow shortly after.”

Update: January 2009  – Arriva Towers

“John Torode, president of Torode Residential –which is constructing numerous condos and commercial buildings in the Beltline and has completed the arriVa tower that signals the start of the rejuvenation of Victoria Park–has changed his plans to build four condo towers in arriVa’s complex.

He had cancelled the fourth tower earlier and now has announced the third tower will be changed instead to a smaller boutique hotel.”  (Source)

Update: April 7, 2009  Arriva Tower, number 2, is now on hold as the developer, Torode,  seeks bankruptcy protection.  Work has stopped on the 42-storey second tower of the Arriva condo project which has about 60 per cent of its 221 units pre-sold.  (Calgary Herald, April 7 2009)

Update:  March 18, 2009

Here’s an update on the condo projects that have been halted:

1. Astoria–9th Street And 10Th Avenue S. W.

2. Oslo–12th Street And 11Th Avenue S. W.

3. Strategic On 4Th –2004 4Th Street S. W.

4. Gateway Midtown–517 10Th Ave. S. W.

5. Sky Tower–201 10Th Ave. S. W.

6. Manchester Station — 5320 2Nd St. S. W. (Filled In)

7. Haras–1215 5Th St. S. W. (Filled In)

8. Grand Park–101 29Th Ave. N. E. (Filled In)

9. Grand Riviera–1505 23Rd Ave. S. W.

You can read more about it here

 For a great look at the proposed projects, under construction, or on hold, take a look at Skyscraperpage.com

Condo Inventory

The number of vacant/new listings on MLS points to the amount of speculation that was involved in the Calgary condo market.    More than 1 in 3 condos on the market at November’s month end were vacant (922 out of 2399)  Over 300 of those vacant were built in 2007-2008.

There are more new/vacant condos on the market today than the entire month-end inventories of Jan-April 2007 (Jan: 886, Feb: 654, Mar: 726, April: 898)

For a “balanced market,” high inventory levels would need to be offset by increased sales volume to create about a 2 to 3.5 month absorption rate.  As of month-end November 2008, Calgary condos had an absorption rate of 8.4 months.

Typically, inventory is the lowest during the winter months which makes me very wary seeing the current level amidst very sluggish sales and a backdrop of economic uncertainty.

Average & Median Prices

If you have any questions or are thinking about buying or selling real estate please feel free to contact me.   In the meantime, I’d love to hear your viewpoint on the real estate market in Calgary.  All respectful comments and viewpoints are appreciated.
 

Mike Fotiou, First Place Realty, is a licensed Realtor(R) and Certified Condominium Specialist.   Feel free to contact or email with any questions. 

-

CMHC Dwelling Type & Definitions

Single Family dwelling is a building containing only one dwelling unit, which is completely separated on all sides from any other dwelling or structure.
 
Semi dwelling is one of two dwellings located side-by-side in a building, adjoining no other structure and separated by a common or party wall extending from ground to roof.

Row dwelling is a ground-oriented dwelling attached to two or more similar units so that the resulting row structure contains three or more units.
 
Apartment and others dwelling includes all dwellings other than those described above, including structures commonly referred to as duplexes, triplexes, double duplexes and row duplexes.

10 responses to “Calgary Condo Market Outlook for 2009

  1. Condo Price Reductions

    In the past 14 days there have been 324 condo price reductions ranging from $1 to $419,100.

    The average price reduction was $14,739

    The $419,100 reduction was for a brand new condo under construction in Victoria Park with a proposed possession date of Sept 2010.

    To Alex: As humorous as the youtube clip was, it accurately portrays a growing number of Canadian households that are facing the same situation: (Global TV News Clips)

  2. Thoughts?

  3. RBC Economics Report

    Calgary Herald, December 8, 2008
    Alberta Housing More Affordable, remains overvalued

    In Alberta, “as stiff headwinds blow on the provincial economy and erode consumer confidence, homebuyers will be reluctant to step into play until affordability improves more significantly,” said Robert Hogue, senior economist at RBC. “The province’s housing affordability conditions still have a fair way to go before returning to long-term averages.”

    “As concerns mount about the economy, spurred by the sharp drop in energy prices that sent shivers down homeowners’ spines, the housing markets in both Calgary and Edmonton are expected to retreat even further in 2009.”

    Read the entire RBC report here

    ———-
    Mike says: One thing I don’t agree with the report is, on Page 6, where they use “Sales to New Listings Ratio” to calculate whether or not a city is in a Balanced/Buyer/Seller market. Hypothetically, if everyone in the entire city listed their house, and there were no new listings, their chart would show the city as being an extreme Seller’s market, which is of course absurd.

    A much more accurate method would be “Sales to Total Inventory Ratio” giving you an absorption rate in days, months, weeks, or (ack!) years.

  4. I think this report shows a more accurate description of what is about to take place in Calgary.

    Royal Lepage’s market outlook of a 1%average home value increase in 2009 is ludicrous. This is the same company that predicted a 3.5% increase last year, when we really received a 6% decrease. If you take that ratio, Royal Lepage is really expecting about a 10% drop in the market. Never listen to a Realtor when it comes to market outlooks. Talk to an investor.

    The majority of the major building contractors left Calgary to go to Saskatchewan in 2007. Do you think that should tell you something? The new home prices have dropped around 25% in the last year. I looked at 1 house selling last year for 1.2 mil now listed at 850,000. Another sold last year for 575,000 and can now be built for 425,000. These are not isolated cases. There are 1,000’s of bare lots and no buyers. The builders own the land and need to recover their money. These price drops will soon hit the used market as well.

    Don’t be surprised if Calgary is down 25% by the end of the year and Condo’s even further.

    Mike says: Thanks for your comments, Shaun. For the record, Royal Lepage is predicting minus 1% for Calgary, but yes, they were off on last years prediction too.

  5. Pingback: Work Stops On Major Calgary Condo Tower

  6. Update: Gateway Midtown Condo (Encore) Restarted. Read the blog post here

    Update: Castello Condo
    Castello Condo Stimulus Package – Calgary Herald, June 2

    Homburg Invest Inc., said it doesn’t want to sit on unsold condos and Tuesday it announced its program for the 19-storey Castello development at 530 12th Ave. S.W.

    In the 106-unit building, there are 42 remaining to be sold…Prices have already been slashed by an average of $100,000 per unit in the condo tower with 60 per cent of the 106 units occupied. Prices range from a low of $400,000 to $1.1 million.

    Read More….

    In February, a national housing report said new unsold condominiums are becoming a concern in the Calgary market.

    The Altus Group Housing Report said most of the unsold units in Calgary are already completed or under construction and the expected decline in new condo apartment sales this year could lead to a “sizable” increase in the number of completed and vacant units.

  7. Update: Astoria on 10th Condo Project

    City orders site to be filled in

    Owners of a Calgary condo project could be found in contempt of court if a gaping Beltline hole isn’t filled after the City of Calgary won a court injunction Wednesday. Citing growing concerns about the safety of the Astoria on Tenth site, city lawyers earned a judge’s order demanding the hole that’s around five storeys deep be filled.

    It’s only the second time the city has won a court injunction against a project’s developer since the downturn began. The first came earlier this year against the owners of Sky Tower, a proposed highrise condo building at 201 10th Ave. S. W.

  8. Update: Arriva Phase 2 in Receivership

    A high-profile residential condominium tower that was under construction near Stampede Park has been put into receivership.

    A receiver was appointed earlier this month for the second phase of the Arriva condo project in the old Victoria Park neighbourhood.

    The project was put on hold in April when the owner of the site, Torode Realty Advisors Ltd. filed for protection under the Companies’ Creditors Arrangement Act as the company sought alternative financing.

    According to the receiver, about 50 per cent of the 221 units had already been sold in the 42-storey second tower, with deposits totalling about $6 million.

    Source: Calgary Herald, August 1 2009

  9. Update on Gateway Midtown

    Construction is progressing, says Rany Klapstein (POV President) adding that the first tower is up to grade and the underground parkade is finished.

    “Based on the response we’ve had so far with the price point, I think we are on the right track,” says Klapstein. “We think we will hit the right number in the sales test by the new year and we hope to go vertical in the spring of 2010.”

    Read entire article:
    December 12, 2009 – Calgary Herald

  10. Is there an update to this?

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