Amid fears of major market corrections in Calgary’s real estate market, a senior analyst said on Tuesday last week (February 16) that oversupply is threatening would-be buyers and sellers of condominium units.
In an interview with CBC News
, author and analyst Don Campbell of the Real Estate Investment Network said that the current market fluctuations in the city—including a significant drop of 37.1 per cent in 2015 in the number of building permits on single- and two-family homes—warrant a closer look on the part of market participants to ensure they take what he called “cyclically sensible actions”.
“We do not see a quick rebound coming in these single-family home permits in 2016,” Campbell said in the interview.
Figures from the Calgary Real Estate Board stated that the local market remained resilient and healthy (average prices stood at a healthy $526,758 last month). Campbell highlighted, however, that potential problems in the near future would arise from demographic shifts that are fueling renewed demand for affordable multi-family options with access to convenient transport.
“These numbers also hide a sad fact that is not being discussed much and that is the loss of the many construction-specific jobs, as well as decrease in retail sales that occur when fewer new homes are purchased. The negative ripple is on top of the already high-profile layoffs in the oil and gas industry,” Campbell warned.
The analyst said that newly built condos and properties purchased via pre-build contracts are most at risk of oversupply and price volatility.
“The largest negative shift in both true value and percentage will be initially at the top end of the market, given the major slowdown in the profitability of many of Calgary's major companies… Then basic real estate math begins to set in as it only takes one or two very motivated sellers who sell their properties at a deep discount to drop the ‘comparables’ price in the whole building,” Campbell said.