Luxury homes are one of the hardest things to sell in Calgary when oil prices are down, which is why sellers are taking matters into their own hands. In fall of 2015, many Calgarians are taking a hard look at their finances and as the real estate market continues to drop off, owners with homes in upper Mount Royal’s prime real estate or the sprawling Springbank estates are becoming acquainted with the newest trend in housing. Like the forecast for oil prices and employment lack promise, so do the odds of selling homes with a million-dollar price tag.
“We’ve definitely seen the incident of sellers who haven’t been able to move homes and have made the decision to rent out their places,” said Realtor Geoffrey Gordon of Calgary’s Gordon Group at CIR Realty.
Referred to as “accidental landlords,” this new trend in housing is the result of high inventory and little certainty about what 2016 will bring, meaning sellers with 10,000 sq. ft., and a carriage house to spare, are no longer able to move their premium property. Instead, they are now faced with the option of finding renters in the interim, or entertaining rock bottom offers that could equate to substantial losses.
“The warning signs are out,” said Gerald Soloway, chief executive officer of Home Capital, when he appeared on a Business News Network segment earlier this year. “It’s only prudent for everybody who participates in that market to heighten their alertness.”
That was in February and the warning signs he referred to related to the impending market crash that’s residual side effects would include massive job losses, which would in turn have a detrimental impact on the Calgary housing market.
According to a number of economists, insurers and lenders, five plus years of ever-increasing oil prices and a real estate market flush with luxury homes in the millions were early signs of hard times ahead – especially for a province that’s so dependent on the energy sector.
As predicted, there have been over 12,000 layoffs in the province in 2015 with more on the way this fall and CREB’s latest statistics reports September 2015 as the city’s worst month for housing resale in the past five years. According to CREB’s chief economist Ann-Marie Lurie, in the September 2015 Calgary Real Estate Market Report, “Rising unemployment and persistent weakness in the local economy is impacting housing demand,” adding, “However, unlike earlier this year when consumers were reacting to uncertainty, recent activity reflects current economic conditions.”
While hopeful homeowners may be counting their days as short-term landlords, the return of the seller’s market may be more of a waiting game. “There’s nothing that points to a rebound in the immediate future,” says Gordon, who noted the housing market is also starting to impact a wider variety of owners. “It’s not just sellers with the million-dollar homes that have been affected. It’s the mid-luxury homes, starting at $700,000 and up that we’ve noticed are slowing down.”