Sellers offer trips, freebies as Calgary condos sit empty
'We aren’t even half-way through this because of the fact that they haven’t quit building yet'
Sellers are offering a trip to New York City or pre-paid condo fees in a bid to get noticed among the glut of condos for sale in Calgary.
There are nearly 1,650 apartments and condos for sale right now, with only 286 sold last month. Yet the average price is holding steady at just over $300,000 and more units are under construction.
"The builders are still enthusiastic but it is surprising because there is a huge inventory of unsold units," said Hilliard MacBeth, the Edmonton-based author of When the Bubble Bursts: Surviving the Canadian Real Estate Crash.
"And that's why we are seeing these amazing incentives to try and get buyers to take action."
Some desperate Calgary condo owners are trying to attract buyers with big incentives. One seller in Marda Loop is offering a week-long trip for two to New York City and a developer in Auburn Bay is offering a year of free condo fees, cable and internet.
In Sage Hill, a buyer can get a $1,800 travel voucher, upgraded appliances or six months of prepaid condo fees.
More sellers to offer incentives
Senior real estate analyst Don Campbell of the Real Estate Investment Network says more sellers will start offering incentives to move their units.
"A strategic buyer will buy it if they think that they can make it work, you know, financially. But they'll probably get it at a discount, which is nice for the buyer, not so great for the seller."
He says it will be a long time before the excess inventory is absorbed.
"We're in for a long ride in Calgary and Edmonton. And I just think that speculators are really being shown to not have a Plan B, and investors are doing incredibly well, because they've had a plan B – i.e. rent it out."
Offering an incentive to buy, like a car or a trip, is preferable to a developer over dropping the price, said MacBeth, but eventually prices need to fall.
"The bad news is it isn't getting any better," he said, pointing to 1,290 multi-family units under construction right now.
"We aren't even half-way through this because of the fact that they haven't quit building yet. A lot of those condos are going to end up in the rental pool, it's inevitable."
Renters enjoy lower prices
That has brought down rental prices, with the average two-bedroom going for $2,000 in 2014 at the peak of the oil prices to $1,500 today, he said.
"The multifamily construction in Calgary and Edmonton both seems to be shifting more towards rentals as well."
Calgary saw similar overbuilding in the 1980s and two major builders went into receivership, he said.
"It's an inevitable cycle. We get the boom-bust. We all know it. We've got the bumper stickers to prove it. But this is a pretty major cycle and it's going to take some time to resolve."