Davidackerman
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Here's s story from the WSJ
Capital of Canada’s energy sector suffers more than other big oil cities like Houston
ENLARGE
In Calgary, March home sales volume tumbled 11% from the same period last year.PHOTO: LYLE ASPINALL/QMI AGENCY/ZUMA PRESS
ByLAURA KUSISTO andRITA TRICHUR
Updated April 5, 2016 4:53 p.m. ET
2 COMMENTS
The housing market in Calgary, capital of Canada’s struggling energy sector, has been hit so hard it makes the challenges faced by U.S. oil towns look relatively mild.
March home sales volume tumbled 11% from the same period last year, according to the Calgary Real Estate Board. Some 2,000 miles to the south in the headquarters of the U.S. oil industry, Houston, home sales were up 2% in February—the most recent data available—compared with the same month last year, according to the Houston Association of Realtors.
In Calgary the slowdown also has been felt by a wider range of homeowners. In Houston most of the pain so far is being felt among sellers of high-end homes priced at $500,000 and above—a sector that saw a 12% decrease in sales volume in the year ended in February.
Until recently, this was also true in Calgary. The slowdown had been more or less confined to high-end homes worth C$700,000 (US$534,800) and higher.
But now that trend is playing out in lower price ranges as well, especially in the C$500,000 to C$600,000 range, which includes the majority of the detached homes, according to Ann-Marie Lurie, chief economist with the Calgary Real Estate Board.
Meanwhile, brokers in Calgary are reporting that sellers have been offering a wide range of incentives to buyers, including a Tesla in one case. Many prospective buyers are retreating to the sidelines in that city, brokers say.
“I haven’t got a buyer in real estate right now who isn’t petrified to even buy,” said Keith Crawford, a Calgary-based realtor with Century 21, adding buyers aren’t sure if prices have hit a bottom.
Calgary’s housing market is suffering more partly because this city of about 1.2 million people has a less diversified economy than Houston. Also, Canada’s economy overall also is still vulnerable to a slowdown right now, while the U.S. economy remains strong.
Finally, Calgary’s oil industry is more dependent on a pricey method of extraction that is more vulnerable to a drop in oil prices. “We are a higher-cost producer area. And we can see it with these lower [oil] prices. It really has translated into significant amount of layoffs,” said Ann-Marie Lurie, chief economist with the Calgary Real Estate Board.
Natural-resources employment in Alberta, the province that includes Calgary, decreased by 7,400, according to the Alberta Treasury Board and Finance, helping bring the unemployment rate to 7.9%—the highest in two decades.
By contrast, the unemployment rate is a still-modest 4.8% in Houston, which also has employers in health care and aerospace.
Much like Houston, Calgary’s real-estate market was more deeply affected when oil prices declined during the 1980s. “In the ’80s, it was a far steeper impact because at that time, we were even more reliant on oil than we are today,” Ms. Lurie said.
THE PROPERTY REPORT
In Houston, the average home price edged up 0.5% to nearly $261,000 in February compared with one year earlier, according to the Houston Association of Realtors.
Brokers say that the incentives being offered by Calgary home sellers indicate even a greater disparity. Their value is worth about C$3,000 to C$5,000, according to Roy Almog, founder of 2% Realty Inc., a discount brokerage.
Typically, those inducements include cash back on closing—funds that could be used to finish a basement, as an example. In other cases, home sellers dangle other goodies such as offers to pay a buyer’s condo fees for the first year.
Incentives on luxury homes have included golf memberships, but those offers have curtailed a bit. “It’s just not selling and so people, for the most part, have taken those homes off the market,” said Keith Crawford, a Calgary-based realtor with Century 21.
Mr. Crawford recently tried to sell a luxury home, listed over C$2 million, that came with an unusual perk: a free Tesla. When that didn’t work, he simply lowered the price by an additional C$250,000.
The slowdown in Calgary has rippled through the office and apartment rental markets. Calgary’s downtown office market, once the envy of landlords everywhere, has seen a reversal of fortunes.
The market has been flooded with space from companies rushing to sublease as well as new supply from towers that broke ground during headier times. This has sent the vacancy rate soaring past 17%, from less than 6% at the end of 2012, while rents have tumbled more than 30% in the same period, according to CBRE Group Inc.
By comparison, the Houston office market is also reeling from an abundance of new supply and sublease space, though rents have been more stubborn—staying relatively flat during the same period. Many local real-estate executives expect rents to fall once more landlords come to terms with the new reality.
In Houston, most analysts expect the rental market to fare the worst in the coming year because falling demand is colliding with a flood of new supply. Rent growth in Houston has slowed for 13 of the past 14 months, according to apartment-research firm Axiometrics Inc. Rents inched up just 0.7% in February, the firm said. Vacancies climbed to 6.6% from 5.8% in the same month last year.
Investment-research firm Green Street Advisors expects rents to actually decline by 1.5% this year. “We think the Houston market continues to weaken and our expectations are that it will be worse this year than most expect,” said Green Street analyst Dave Bragg.
Similarly, the apartment rental market in Calgary is also suffering from rising vacancies. Vacancy rates in rental apartment buildings in the Calgary Census Metropolitan Area rose to 5.3% in October 2015 from 1.4% in the previous year, according to the Canada Mortgage and Housing Corporation.
“The longer you have these people unemployed, the more we start to see it impact all aspects of the market,” said Ms. Lurie, of the Calgary Real Estate Board.
—Eliot Brown contributed to this article.
Capital of Canada’s energy sector suffers more than other big oil cities like Houston
ENLARGE
In Calgary, March home sales volume tumbled 11% from the same period last year.PHOTO: LYLE ASPINALL/QMI AGENCY/ZUMA PRESS
ByLAURA KUSISTO andRITA TRICHUR
Updated April 5, 2016 4:53 p.m. ET
2 COMMENTS
The housing market in Calgary, capital of Canada’s struggling energy sector, has been hit so hard it makes the challenges faced by U.S. oil towns look relatively mild.
March home sales volume tumbled 11% from the same period last year, according to the Calgary Real Estate Board. Some 2,000 miles to the south in the headquarters of the U.S. oil industry, Houston, home sales were up 2% in February—the most recent data available—compared with the same month last year, according to the Houston Association of Realtors.
In Calgary the slowdown also has been felt by a wider range of homeowners. In Houston most of the pain so far is being felt among sellers of high-end homes priced at $500,000 and above—a sector that saw a 12% decrease in sales volume in the year ended in February.
Until recently, this was also true in Calgary. The slowdown had been more or less confined to high-end homes worth C$700,000 (US$534,800) and higher.
But now that trend is playing out in lower price ranges as well, especially in the C$500,000 to C$600,000 range, which includes the majority of the detached homes, according to Ann-Marie Lurie, chief economist with the Calgary Real Estate Board.
Meanwhile, brokers in Calgary are reporting that sellers have been offering a wide range of incentives to buyers, including a Tesla in one case. Many prospective buyers are retreating to the sidelines in that city, brokers say.
“I haven’t got a buyer in real estate right now who isn’t petrified to even buy,” said Keith Crawford, a Calgary-based realtor with Century 21, adding buyers aren’t sure if prices have hit a bottom.
Calgary’s housing market is suffering more partly because this city of about 1.2 million people has a less diversified economy than Houston. Also, Canada’s economy overall also is still vulnerable to a slowdown right now, while the U.S. economy remains strong.
Finally, Calgary’s oil industry is more dependent on a pricey method of extraction that is more vulnerable to a drop in oil prices. “We are a higher-cost producer area. And we can see it with these lower [oil] prices. It really has translated into significant amount of layoffs,” said Ann-Marie Lurie, chief economist with the Calgary Real Estate Board.
Natural-resources employment in Alberta, the province that includes Calgary, decreased by 7,400, according to the Alberta Treasury Board and Finance, helping bring the unemployment rate to 7.9%—the highest in two decades.
By contrast, the unemployment rate is a still-modest 4.8% in Houston, which also has employers in health care and aerospace.
Much like Houston, Calgary’s real-estate market was more deeply affected when oil prices declined during the 1980s. “In the ’80s, it was a far steeper impact because at that time, we were even more reliant on oil than we are today,” Ms. Lurie said.
THE PROPERTY REPORT
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- Weak Loonie Lures U.S. Home Buyers to Canada
- Surge in Land Prices Adds Froth to Vancouver Market
In Houston, the average home price edged up 0.5% to nearly $261,000 in February compared with one year earlier, according to the Houston Association of Realtors.
Brokers say that the incentives being offered by Calgary home sellers indicate even a greater disparity. Their value is worth about C$3,000 to C$5,000, according to Roy Almog, founder of 2% Realty Inc., a discount brokerage.
Typically, those inducements include cash back on closing—funds that could be used to finish a basement, as an example. In other cases, home sellers dangle other goodies such as offers to pay a buyer’s condo fees for the first year.
Incentives on luxury homes have included golf memberships, but those offers have curtailed a bit. “It’s just not selling and so people, for the most part, have taken those homes off the market,” said Keith Crawford, a Calgary-based realtor with Century 21.
Mr. Crawford recently tried to sell a luxury home, listed over C$2 million, that came with an unusual perk: a free Tesla. When that didn’t work, he simply lowered the price by an additional C$250,000.
The slowdown in Calgary has rippled through the office and apartment rental markets. Calgary’s downtown office market, once the envy of landlords everywhere, has seen a reversal of fortunes.
The market has been flooded with space from companies rushing to sublease as well as new supply from towers that broke ground during headier times. This has sent the vacancy rate soaring past 17%, from less than 6% at the end of 2012, while rents have tumbled more than 30% in the same period, according to CBRE Group Inc.
By comparison, the Houston office market is also reeling from an abundance of new supply and sublease space, though rents have been more stubborn—staying relatively flat during the same period. Many local real-estate executives expect rents to fall once more landlords come to terms with the new reality.
In Houston, most analysts expect the rental market to fare the worst in the coming year because falling demand is colliding with a flood of new supply. Rent growth in Houston has slowed for 13 of the past 14 months, according to apartment-research firm Axiometrics Inc. Rents inched up just 0.7% in February, the firm said. Vacancies climbed to 6.6% from 5.8% in the same month last year.
Investment-research firm Green Street Advisors expects rents to actually decline by 1.5% this year. “We think the Houston market continues to weaken and our expectations are that it will be worse this year than most expect,” said Green Street analyst Dave Bragg.
Similarly, the apartment rental market in Calgary is also suffering from rising vacancies. Vacancy rates in rental apartment buildings in the Calgary Census Metropolitan Area rose to 5.3% in October 2015 from 1.4% in the previous year, according to the Canada Mortgage and Housing Corporation.
“The longer you have these people unemployed, the more we start to see it impact all aspects of the market,” said Ms. Lurie, of the Calgary Real Estate Board.
—Eliot Brown contributed to this article.
