We have all heard the doom and gloom reports from the media about how the drop in the price of oil and the possible negative impact of the NDP government will affect the Calgary real estate market.
Is this in fact the case?
The answer depends on what price range of home you are looking for. The Calgary Real Estate Board (CREB) released its sales numbers for May showing that while activity is 25 per cent lower for the overall market, the average price of $478,790 is only lower by 1.5 per cent from May 2014.
The numbers show that the average price for detached bungalows increased 3.8 per cent to $498,400 compared to last year while standard two-story homes increased 1.7 per cent to $480,656. Standard condominiums recorded moderate growth of 2.9 per cent to $286,913. Nearly 70 per cent of the homes sold in the Calgary region in May went for
less than $500,000.So no sign of a price drop here; in fact, houses located in high demand neighborhoods are seeing multiple offers!
However, where we are seeing a price drop and a slowing is in the luxury home market. In May, there were more than 600 homes for sale in the city listed at more than $1 million. Only 65 of them sold last month, which suggests there’s nine months of inventory on the market. For every 10 new listings, there were two sales.
How can you take advantage of this current market? Here is a strategy that I have put into play for a number of my clients. These clients have been looking at buying a luxury home for a few years now and always felt the prices were too high. So now is their chance. The approach we used was to keep their existing home as a rental and have the rental income to help them qualify for an underpriced luxury home. Calgary’s rental market is still strong and demanding good rents.
The theory being to buy the high end house while its prices are lower than before and hold on to the existing mid value house until the prices in that sector climb. Then sell it. I even have lenders that will use a Market rents report to determine what the rental income will be. This removes the need to have a tenancy agreement in place. Some lenders allow me to use a rental worksheet that can, depending on the rental income, completely offset the cost of owning the house. The end result is my clients really end up qualifying with full income just to buy the new home!
I am aware that this strategy only works for a few prospective buyers. However, now that the May numbers are out (May is the busiest month for real estate) maybe consumer confidence will improve as we are not seeing a massive price fall in the majority of house sectors. This market is similar in price to previous markets where people where buying.
Now you have more inventory and time within which to buy! If you would like to discuss this approach or have any other mortgage needs, please let me know!