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Record prices and soaring demand for housing, including multi-family, especially from out-of-province buyers are pushing developers to get creative to add more supply to the market.
“We’re seeing a lot more out-of-province interest in Calgary’s multi-family, and it’s because of lower relative costs than in areas like Ontario,” says Haig Basmadjian, senior associate for multi-family investment in Calgary with Avison Young.
“Alberta is calling, and Ontario is answering.”
Basmadjian is referencing the successful Alberta government marketing campaign of the last year aimed at attracting professionals from major Ontario municipalities where average prices for homes hover around $1 million or more.
That’s compared with Calgary where the benchmark price of a resale home reached more than $570,000 in August — a record high, according to the Calgary Real Estate Board.
As well, new multi-family sales in Calgary achieved a record pace for the period of April to June, a recent Zonda Urban report found.
“It wasn’t necessarily a surprise because we were looking at migration trends, and those continue to be sky-high, which is what drives housing,” says analyst Cameron Slavik with Zonda.
The report found 1,658 sales took place in the three-month span, the second highest level of activity for any quarterly period in Calgary.
In turn, the city is seeing a flurry of development activity for new condominium apartments and townhomes.
“There were 10 launches in the second quarter, including eight condominium launches, which is above average for one quarter,” Slavik says.
The rental side is equally hot.
In fact, low vacancy and rising rents are fuelling demand for condos, he adds.
Recent data from Zonda on the rental market shows that new rental vacancies were at three per cent as of June 30 for newly launched projects and less than one per cent for stabilized (launched in the last few years).
Canada Mortgage and Housing Corp. data from last fall, the most recent data available, showed vacancy was 2.7 per cent for purpose-built rental and 1.8 per cent for the secondary segment, whereby owners rent their condominiums.
Low vacancy has pushed up rents with the average price of a one-bedroom in the city reaching more than $1,700 a month, August data from Liv.rent, which tracks rental markets across Canada.
The low vacancy for rentals has created an affordability challenge for Calgarians — be it higher rents or higher prices for entry-level homes.
Developers, too, are facing challenges to add affordable, new supply to the market quickly. That’s led to some getting creative with office-conversions, or refurbishing existing dilapidated rental buildings.
Among those is Toronto-based Bluevale Capital Group, which recently completed a 16-unit, rental project in Calgary’s Beltline aimed at affordability.
“One of the only ways to create affordable housing and increase housing stock quickly is to retrofit underutilized, existing buildings,” says Jefferson Huang, managing partner at Bluevale.
Called Beltline Terrace, the building had been an empty low-rise apartment, owned by a non-profit, that was unlivable. Leveraging a CMHC program providing favourable funding, including a 50-year amortization, Bluevale was able to secure financing for the project and then renovate and update the apartment in a matter of months, as opposed to building an entirely new project, which can take years to complete.
“What’s more, the all-in costs are about $200 to $220 per square foot,” Huang says. “That is half the price of a brand-new build today.”
Currently fully rented with newcomers from South Korean, Ukraine, locals and tenants who moved to Calgary from other provinces, the project illustrates how developers must be increasingly inventive to add supply to the market as supply remains a challenge.
“The best way to create affordable housing isn’t to create new housing stock but retrofitting existing buildings to get them online in a matter of months as opposed to years,” Basmadjian says.