Calgary Real Estate: Challenges vs. Opportunities
Calgary Real Estate and Rental Market Update
May 1, 2024 - Written by Jamie Palmer, President/Broker of Power Properties
Opportunities in the Market
The Calgary real estate market continues to buck nationwide trends with an 11% year-over-year increase in prices, low inventory, and high sales volumes. In the past twelve months, the factors causing Calgary’s market to surge are unlikely to change in the next 3-5 years. With significant inter-provincial immigration, relatively affordable housing (compared to B.C. and Ontario), and a shortage of skilled trades to build homes faster, the supply/demand imbalance is effectively baked in.
In addition to the increase in prices we are seeing as a result of the above-listed factors, there is an additional opportunity that will likely see a significant surge in home values. The Bank of Canada is expected to cut interest rates at some point this year, which is in turn expected to unleash a torrent of buyers who have been sitting on the sidelines waiting for lower rates, further fueling demand.
The Challenges We’re Facing
That’s the opportunity, what are the challenges? There are two significant challenges right now in purchasing Calgary real estate. One, the properties won’t cash flow without significant down payments; two, you will experience a bidding war on almost every property.
The cash flow challenge can be overcome with a significant down payment. As an example:
A $500,000 property with a 50% ($250,000) down payment. If this increases 10% in the next year, assuming a neutral cash flow, this will produce a 20% return on investment (10% of $500,000 = $50,000; $50,000/$250,000 = 20%)
The bidding war challenge can be psychologically difficult, however, Power Properties’ Realtors have extensive experience and can help you successfully navigate a multiple-offer situation. They can advise you on strategies to be the successful purchaser.
Taking Advantage of the Opportunities
Looking back, how many of you wish you had bought more property in 2020? There is still significant opportunity in the Calgary market to be taken advantage of.
As far as Calgary rents are concerned, we continue to see upward movement with rents increasing approximately 5% per quarter. The biggest movement is of course in properties under $2000/month, however, we are seeing increased demand for detached properties over $3000/month. Rents typically lag sales prices by six months, but since the sales prices continue to increase, the disconnect between sales price and rent will likely continue for some time.
Written by Jamie Palmer, President/Broker of Power Properties Ltd.
Jamie Palmer is the President and Broker of Power Properties. He holds a Certified Property Manager (CPM®) designation, the highest designation in Property Management in North America. He earned an Honors degree from the University of Toronto, and he has over two decades of experience in property management.
About Power Properties Ltd.
Founded in 1980, Power Properties has been providing hassle-free property management services to property owners, property investors and non-residents with homes in Calgary, Alberta for over 40 years. Our full-service property management includes everything from move in to move out, so you don’t have to worry about the day-to-day operations of your rental property. With a team of licensed professionals, years of experience, and award-winning service, you can rest assured that your property is in good hands.
