A Year of Surprises

For a year that began with cautious optimism, 2013 is going to end as year of confidence.

Following a year that saw sales in Calgary increase by nearly 15 per cent, the forecast for 2013 called for a slight increase in sales, with MLS®c transactions expected to top 21,650. With just a few days left in the year, this year's sales in Calgary exceeded expectations. "This past year has been exciting on so many levels," said CREB® President Becky Walters, who saw the city's response to the June floods as a prime reason why so many are choosing to call Calgary home.

"It's a city that people want to live in. People recognized the heart that the city has when they looked at those stories. They recognized the atmosphere that's here. This is a great place to call home."

Through the first 11 months of this year, 22,322 homes traded hands in Calgary – an increase of nearly 11 per cent over the same period in 2012. Examining the factors that helped drive transactions, Calgary's status as Canada's top spot for net migration played a key role in increasing demand for homes.

"Both sales and price growth exceeded our expectations in 2013," said CREB® Chief Economist Ann- Marie Lurie. "Stronger than expected demand was related to higher than expected migration and employment growth, while the tight rental market got tighter following the floods.

"Meanwhile, supply levels didn't keep pace with rising demand, which pushed the market to favour sellers and created stronger than expected price growth."

Calgary drew 19,000 new residents via in-migration in 2013 – the second straight year of such growth for the city. As a result, finding an apartment in Calgary's cramped rental market proved tougher than ever.

According to Canada Mortgage and Housing Corporation (CMHC), rental apartment vacancy rate in Calgary was one per cent in October 2013, down from 1.3 per cent in October 2012. CMHC reported the average twobedroom rent in the Calgary CMA was $1,224 in October 2013, up from $1,150 in October 2012.

"A record level of net migration has continued to support rental demand in Calgary, thus putting downward pressure on the vacancy rate. A modest decline in the supply of rental units also contributed to the reduction in vacancies," said Richard Cho, CMHC's senior market analyst for Calgary.

The June floods took an estimated 500 secondary suites off the market and forced more than 1,000 Albertans to seek temporary accommodation. Of the eligible homeowners who live in areas deemed as floodways by the provincial government, 101 have expressed interest in the relocation program as of the Nov. 30 deadline. Forty-six offers have been accepted, valued at $42 million. Total flood costs are now pegged at $6 billion.

Even with the massive losses brought about by flooding, it wasn't hard to find positives for area homeowners. For those looking at selling their homes, price growth in Calgary was tops in all of Canada. According to the Canadian Real Estate Association (CREA), the average price of a Calgary home rose by 8.8 per cent over the last 12 months. While the price of a new home in the city was also on the rise in 2013, increasing by 6.1 per cent in October 2013 compared to 2012, ATB economist Todd Hirsch said the growth is well supported.

"The upswing in new home prices in Calgary is also consistent with rising prices for existing homes," said Hirsch. "Still, the residential market in [Calgary and Edmonton] remains fairly balanced and healthy, lifted by a steady flow in international and interprovincial migrants."

Despite the increases, Calgary was still listed as one of the most affordable major markets in the country. According to RBC's Housing Trends and Affordability Report, increasing home prices in the city have been accompanied by higher average household incomes helping to ensure that affordability conditions remain relatively favourable.

"Much like the rest of Alberta, Calgary's hot labour market, increasing population and booming economy are the key factors underpinning housing market activity," said Craig Wright, senior vice-president and chief economist, RBC. "The flooding that hit the area at the end of June had very little impact on resales, which clearly demonstrates the market's resilience and continued strength."

Economic conditions are expected to remain favourable in 2014, according to CREB®'s forecast preview. Aided by rising listings and increased competition from the new home sector, the Calgary market should lean towards balanced conditions in the later part of 2014.

While Lurie did acknowledge the risk present in the city's energy sector, CREB®'s 2014 forecast for the city of Calgary calls for 3.6 per cent sales growth and price growth of 4.3 per cent.

"Although energy is a large part of the Alberta economy, there is also significant economic diversity with a demand for employees across the job spectrum," said incoming CREB® President Bill Kirk. "Having just seen the robust performance of 2013, especially in contrast to other Canadian markets, I expect to see next year's performance to be measurably better."