Attached sector reacting similar to others during downturn
Softness in the city’s attached housing market is creating opportunities for would-be buyers as increased selection is resulting in more competitive pricing, according to local housing officials.
Sales of row-type housing and semi-detached properties, which make up the city’s attached market, decreased last month by 10.5 per cent compared to the same time last year, according to CREB®’s regional housing market report.
Listings also declined, yet by a more moderate 5.2 per cent. When combined with existing listings, year-over-year inventory levels jumped in January by more than 20 per cent.
More product on the market has meant sellers have had to be more competitive with their pricing. According to CREB®, the attached benchmark price was $345,600 last month, a 1.65 per cent decline from last month. Looking back on 2015, it slid 1.29 per cent from the start to the end of the year.
“If anything, now is the time to get into the attached market,” said Akbar Nimji a real estate professional with RE/MAX House of Real Estate.
In the past year, Nimji has witnessed pricing on inner-city semi-detached homes drop by close to $100,000.
“That’s a $440 difference on a mortgage payment,” he said, adding lower prices for inner-city attached real estate may sway those who in the past were considering purchasing in the suburbs because of comparatively lower cost to move closer in.
In CREB®’s 2016 Economic Outlook & Regional Housing Market Forecast, chief economist Ann-Marie Lurie predicts further declines in both number of sales and in prices in Calgary’s attached resale market in 2016.
Weaker-than-normal economic conditions, combined with additional supply, is expected to place downward pressure on the sector, with the benchmark price expected to decline by
3.5 per cent to $342,101 from $354,508 in 2015.
“The uncertainty is tremendous,” says local developer Rob Henschel.
Henschel has seen the market change first hand, especially in neighbourhoods such as Marda Loop, Killarney, Altadore, and Richmond Hill, where he sources his development projects and has built both four-plex homes and single-family luxury infill designs.
“People were rushing to buy two years ago,” he said. “The market was hot. At the time, it was the right price point especially for the four-plex home. Buyers could get a fair amount of square footage and great design in a cool area. It really made sense.”
Now, the story is different. Henschel recently had an opportunity to participate in another four-plex project in the inner-city, but stepped away due to market conditions.
“No one really knows where it is going,” he said, citing Calgary’s rental market as one potential risk to sectors like attached, as high vacancy rates and more aggressive pricing encourages renters to stay put for the time being.
“But it could go either way.”
Further risk to the sector comes from new builds. According to Canada Mortgage and Housing Corp., close to 20 per cent of multi-family product currently under construction consists of attached homes.
“Those newly completed homes hitting the market will be a huge factor, causing prices to slide even further,” said Nimji.
Looking forward, Nimji anticipates that if current market conditions persist, many first-time buyers may skip the entry-level apartment-style condo market and park themselves directly into the attached segment.
He also believes the housing market as a whole will rebound eventually.
“Calgary is cyclical and I have always advised my clients of that,” said Nimji. “The market will recover in the inner-city.”