Increased listings allow for more variety when buying in the luxury market
Gizella Davis has been through this all before.
The 38-year real estate veteran with Royal Lepage Foothills has lived through the peaks and valleys of Calgary’s inherently cyclical housing market – including the most recent, which has felt the full force of a downturn in oil prices.
Yet from experience, she’s “not concerned one bit” about how the industry – in particular the luxury housing segment – will react long term.
“I have seen this before – except, previously, some people didn’t have as much money as they do now,” she said. “I have a feeling (this will last) a couple more months – once spring comes. The optimism always comes back with the spring.”
Two dozen homes priced $1 million or more sold in Calgary last month, a 57 per cent drop year-over-year, as well as month-over-month, according to CREB®.
This comes after Calgary’s luxury resale housing segment posted a record year in 2014, with 854 million-plus sales eclipsing the previous mark of 726 set in 2013.
CREB® chief economist Ann-Marie Lurie attributed record sales in 2014 to low lending rates, improving wages, rising prices and solid economic fundamentals.
This year, however, luxury buyers are being more cautious in light of ongoing uncertainty in the energy sector. After significant declines starting in October, oil prices started to see some improvements recently before another slight drop this week. West Texas Intermediate, a U.S. grade of oil used a benchmark for North American oil prices was just over $53 US a barrel this week after dropping to near $40 earlier this year and off 43.32 per cent compared to the same time last year.
“Typically what happens is higher-end homes often are affected because people are more hesitant to make any significant changes on upgrading in a time of uncertainty, particularly if they’re concerned with their jobs,” said Lurie.
Davis notes there is a silver lining in Calgary’s current luxury market. While sales have tempered, listings of homes priced more than $1 million have increased by 47 per cent year over year to 248 units, creating more selection for buyers.
And in addition to more choice, buyers were treated to a surprise decision from the Bank of Canada in January when it decreased the overnight lending rate from one per cent, as it had remained since September 2010, to 0.75 per cent.
A number of financial institutions have responded by lowering their respective interest rates. A recent report from TD Economics said the prime rate has come down by 15 basis points and special five-year mortgage interest rates of under three per cent have returned to the marketplace.
“This is the best time to [buy luxury] because the mortgage rates are so low,” said Davis. “I’m slowly getting through to some people because if you want to upgrade, this is the time to do it.”
Plenty of new luxury condo product is also set to join the Calgary landscape over the next two years.
The Guardian South near Victoria Park is slated for first occupancy by 2016. The 44-storey, 318-unit tower is offering units ranging from $264,900 to $2.19 million.
In nearby Mission, The River with units ranging in price from $1.8 million to $7.9 million, and is expected to open this spring. It will be joined by The XII, a 12-unit building expected to be completed in 2017. The exclusive development will offer units ranging from $2.95 million to $5.8 million, and come complete with fully automated parking.
“As far as the offering, being able to purchase in an exclusive 12-unit building is unique in itself, where … having as few neighbours as possible is achieving our goal,” said Stanley Yasin, managing partner for the development.
“We think that the benefits of automated parking are substantial – from safety and security to efficiency to being in an area with a high water table … You don’t need to excavate nearly as much as you do in a conventional approach. So we think that the benefits are all of those and more … It’s the way of the future.”