A Look Back & Look Ahead - Acreage Activity
By Wayne Chaulk
It was interesting to analyze and review the actual recorded sales activity levels for 2017 in the two MD’s so I could get a true understanding of sales across various categories and price ranges. We all need to be discerning when reading projections about real estate trends in the news as there is a tendency for some reporters to lump real estate statistics such as percentage historical results and predicted price gains across all real estate and one doesn’t get a true sense of differing actual numbers for various sectors of the marketplace. This can affect people’s attitudes and sometimes leads to unfounded pricing expectations and trends among sellers and the public.
MD Foothills Activity.
During all of 2017 there was only 1 sale in the $1.8M to $5M range in all of Foothills for the smaller size land parcels 2 to 20 acres! There were 2 others but they were very large land parcels (160 & 320 acres) that the homes were on. This verifies the challenge in the higher price sector that still exists for luxury style acreages, particularly in areas of Foothills.
There were only 4 sales in the $1.5M to $1.8M and once again 2 of these were larger land parcels (40 acre range) with 2 sales for smaller sized acreages. 14 sales in the $1.2M to $1.5M range and 22 sales in the $1M to $1.2M range. So clearly if you were in the $1.5M and above price category it was a slow year again for product sales. With the new tougher mortgage rules now in place I suspect it may likely be another challenging year for some high priced product. But we need to be hopeful that a seemingly improving business environment in Alberta could change some of that.
Of note is that there were 72 sales in the $750K to $1M range so that was encouraging to some extent regarding overall sales. If you acreage is slightly over $1M, being just under $1M improves selling chances.
MD Rockyview Activity:
Looking at the MD Rockyview reflected a different picture, which is usually the case. There are many more executive style smaller acreages and very ‘high end’ homes. In many areas of Rockview there is more acreage development that is more of a ‘very large city lot’ type environment.
Throughout 2017 there were 22 sales in the $1.8M to 5M range in Rockyview! Quite a different picture from Foothills! There were 30 sales in the $1.5M to $1.8M, a whopping 44 sales in the $1.2 - $1.5M and 42 sales in the $1M to $1.2 M. Under $1M there were well over 130 sales.
So a total of 278 acreage sales in the Rockyview county and a total of 156 throughout the Foothills. As I said, there are many more acreages throughout Rockyview including Springbank, Bearspaw with their numerous 2 acre developments etc. so hard to compare to Foothills. I would say that in total across both MD’s it is encouraging to see a substantial total of acreage sales overall indicating an improving or at least a fairly active environment it seems.
Looking Forward - 2018
One of the key factors that will affect some purchasers in 2018 is the higher standards for stress tests on uninsured mortgages, affecting buyers with more than 20 per cent down.
The incoming Office of the Superintendent of Financial Institutions (OSFI) mortgage financing stress test took effect on January 1, 2018. It targets existing and prospective homeowners applying for a mortgage, requiring them to meet stricter criteria when seeking new financing. Even if one puts in more than 20% one still has to qualify for the posted rate +2% for a mortgage.
Royal LePage and other industry groups weighing in on this say that could impact sales confidence in the early part of the year as consumers adjust. There are people that potentially could have qualified for a higher purchase price before this stress test, before these new OSFI rules, that now will find that they qualify for a lower purchase price.
There is industry optimism that sales will pick up later in 2018, driven by Alberta’s recovering economy, especially in the energy sector. Royal LePage is calling for the aggregate price of homes in Calgary to rise about 2.3% in 2018 to just over $494,000, with single family homes under the $500,000 mark seeing the biggest bump.
Bear in mind this prediction is for city properties. It is yet to be seen if that sort of percentage increase will be realized for country properties as acreage price movement does not necessarily correlate with city trends. Whether in the city or country, once you get into the high price brackets trends vary given the wide range of pricing and sometimes complex acreage environment. Also for high priced acreages many of the buyers often have larger equity contributions and buying power for purchases and mortgage testing is not as critical to a purchase. My prediction is that pricing in the country will likely remain similar to 2017 as there are still large pools of inventory in most price brackets in the country.
Currently there are 68 acreage listings in the Foothills above $1M and 207 in Rockyview above $1M so plenty of inventory to absorb before sellers can get too demanding on pricing and expecting offers to match list price.
My advice to sellers is that when you get an offer ‘work it’ to a negotiated end even if you get a lower than desired opening offer as they are often hard to get in some price sectors with a limited buyer choice & somewhat shrinking country buyer pool.
A few signs that our Alberta environment is looking up:
Oil still going up
As I write this, oil is closing in on $65 per barrel, closing on Friday Jan 12 at $64.45. Oil has been on a high in the last quarter and is starting off 2018 with momentum.
Canada oil rig count up last week
Winter is the busy season for drilling and last week there were 87 new rigs started in Canada. This is a 10 month high for drilling firms.
Both of these trends will hopefully lead to more jobs and greater stability and more positive attitude in the oil and gas sector.
On a more pessimistic note, however, Bill Morneau, Canada’s Finance Minister, is predicting that the Canadian economy will slow in 2018. With the NAFTA agreements negotiations and other export markets in limbo due to NAFTA, he expects reduced business investment and hiring in 2018.
No-one has a crystal ball, however, including yours truly, but as we move into 2018 let’s choose to do so with thankfulness for the wonderful part of the world in which we live and to work hard to make this area even more prosperous, cared for and enjoyable for us all.