NEW HOUSING MARKET CONTINUES UPWARD SWING DESPITE MOUNTING CHALLENGES
BY JAMIE ZACHARY
Allison Grafton has seen many of Calgary’s most popular communities transform right in front of her eyes. In fact, she’s had a hand in many of those changes.
The founder and president of luxury custom home builder Rockwood Custom Homes has been “disrupting” Calgary’s housing market since the company formed in 2009 – apropos given the changing landscape over that time.
“The luxury market has not slowed down for Rockwood. In fact, within Calgary, we’ve grown around 20 per cent over the past two years alone,” says Grafton, whose company is a regular within inner-city communities such as Bel Aire, Britannia, Elboya, Mount Royal, as well as its own exclusive developments such as Lazy H and Abby Farm in Springbank.
“We’re so busy because there’s just so much opportunity. In the last eight months … as the city has started finding its legs again, we’re seeing more inquiries, especially within the inner city – more than we’ve ever had in 13 years.”
It’s a comment echoed by Jordan Chambers, who works in business development for Rockwood, and subsequently, has had a front-row seat to much of the action. “The amount of inquires we are getting on any given day has been significant,” she says. “And it’s coming in different ways. We have clients who are reaching out to us directly, as well as lot owners, developers. So a lot of inquires from a lot of different spaces in the market.”
Rockwood’s story is symbolic of a renaissance that’s continuing to reshape Calgary’s new housing market. After a downturn in early 2020 due to lockdowns associated with the pandemic, residential construction in the city has been firing on all cylinders ever since.
“In general, we’re seeing a lot more construction and activity in general so far this year, and it’s supportive of continued demand that extends back to 2021,” says Michael Mak, senior economics analyst with Canada Mortgage and Housing Corp. (CMHC).
“There doesn’t seem to be any sign of it slowing down, either. We’re continuing to see strong demand across all types of the housing spectrum.”
And Calgary seems well-positioned to meet growing demand moving forward – especially when compared with other jurisdictions across Canada.
“ROCKWOOD’S STORY IS SYMBOLIC OF A RENAISSANCE THAT’S CONTINUING TO RESHAPE CALGARY’S NEW HOUSING MARKET. AFTER A DOWNTURN IN EARLY 2020 DUE TO LOCKDOWNS ASSOCIATED WITH THE PANDEMIC, RESIDENTIAL CONSTRUCTION IN THE CITY HAS BEEN FIRING ON ALL CYLINDERS EVER SINCE.”
In a report issued this past June, CMHC notes current practices need to change to better restore affordability to the country’s housing sector. Specifically, it’s calling for 3.5 million additional housing units beyond current projections by 2030 – two-thirds of which are needed in Ontario and British Columbia.
Yet CMHC singles out Alberta as an example of how to best go about increasing that housing supply. The national housing agency says that while productivity growth in the industry has been notoriously weak nationwide, Alberta has been better able to meet growing demands by allocating more resources to new home starts – 8.4 workers per construction site in 2021, compared with a historical low of 3.3 in B.C.
In turn, a deeper stock of inventory in our province has better balanced out housing prices relative to income. Only 31 per cent of household income was needed to afford the average price of home in Alberta last year, which CMHC reported at $426,000. In comparison, that ratio peaks at 44 per cent in B.C., where the average price was a staggering $929,000.
Specific to Calgary, Mak points to strong completion numbers as a strong indicator of how the local industry has best tackled rising demand. Since early spring, he notes more than 1,000 units are being completed monthly in the city, which is comparable to highs reported in 2013-14.
“We haven’t seen those types of numbers in years,” says Mak, reiterating that healthy supply remains important as demand continues to be driven by strong economic activity in the province, illustrated by unemployment numbers that are now below 2019 levels and positive migration numbers over consecutive quarters.
CMHC reports the average price of a new single-family home in Calgary heading into this summer was around $560,000, up from a base of $510,000 over the past couple of years yet still off all-time highs of around $590,000 set in 2015.
Of note, Mak points to single-detached starts and new apartment construction levels that continue to rebound to levels last seen in 2014 and 2015, respectively.
Interestingly, a separate CMHC housing supply report released this past spring notes approximately 40 per cent of new apartment construction in Calgary is being targeted toward rental use. By comparison, only an average of 15 per cent were intended for use in the primary rental market between 2011 and 2020.
In terms of where in Calgary new residential construction activity is taking place currently, CMHC points primarily to the north around Livingstone and Carrington, as well as communities such as Mahogany and Seton in the south.
That said, residential construction activity is strong citywide, notes Matthew Sheldrake, manager of growth and strategic services at the City of Calgary. For example, he points to 23 new communities across all four quadrants that recorded more than 100 new builds in 2021 – a trend that has continued in 2022.
Perhaps not surprisingly then, the single-family segment is representing a growing share of total new starts in the city. As Sheldrake notes, “there is no question that the single-family market on the edge of town is the strongest (segment).”
While single-family represented 35 per cent of all new starts in 2019, that number jumped to 44 per cent in 2021. And Sheldrake says the split between single- and multi-family in new communities – where a lion’s share of residential construction activity is taking place – is closer to 80/20.
Sheldrake acknowledges the local housing market is continuing to see “enviable” growth in 2022. Yet he also points out it has been anything but a linear path to get here.
“The shape of the curve has been quite high … from an eight-year low in 2020 to an eight-year high in 2021. And we actually started 2022 faster than 2021, if you can believe it,” he says, noting year over-year starts were up more than 35 per cent at the start of 2022.
However, that started to taper off by June. According to the City, year-to-date starts near the midyear mark were around 2,100 from around 1,900 in 2021.
“It’s a pretty easy answer as to why: interest rates have gone from two per cent to more than five per cent in just six months, which can be $800 more a month for a new homebuyer,” says Sheldrake.
Interest rates are not the only challenges Calgary’s housing sector will face moving forward, either. Sheldrake and Mak also point to delivery times of new homes creeping up due to material shortages and difficulties attracting skilled labour.
Despite this, Grafton says her team at Rockwood remain optimistic for 2022 and beyond.
“Challenges are going to continue to present for the next year to 18 months. However, I feel people are very clear on their wishes and wants for how they want to live. A home has become more important than it’s ever been,” she says.
“I’m very bullish. Yes, it’s been a tremendous learning curve over the past two years, but the last six months have been very, very strong. For Calgary, it feels like the energy is here.”