Calgary - Klondike for investors
For a long time, Calgarys real estate market was heavily dependent on energy prices. In 2005–2008, when oil prices were at their peak, the city was literally booming. The rental vacancy rate was practically zero, and real estate prices were comparable to those in Toronto. Then difficult times began for Albertas economy: energy prices collapsed, most companies shut down production because it was no longer profitable, and many people moved to other provinces. Albertas real estate sector also entered a crisis. Prices did not exactly fall, but they stopped growing. From 2010 to the end of 2020 — in other words, over an entire decade — real estate prices in Calgary barely increased. By comparison, during the same ten years, real estate in the GTA rose by about 250 percent.
In 2019, the Government of Alberta made, in my opinion, a series of truly decisive moves aimed at reducing the province’s dependence on the energy sector. Ideal conditions for doing business were created here. Today, Alberta has the lowest corporate tax rate in Canada — 8% — while the sales tax is only 5%, compared with 13% in Ontario. Naturally, companies whose operations are not tied to a specific location immediately began moving here. Since 2019, more than two and a half thousand high-tech companies have either fully relocated to Alberta or opened offices here, creating thousands of new jobs. At the end of 2021, Amazon entered the Calgary market, choosing the city for the opening of a cloud computing hub in which the company plans to invest more than 4 billion dollars. This alone is expected to bring thousands of new jobs to Calgary between 2022 and 2024. When an investor of this scale enters a market, it always attracts smaller companies as well — and together they create an even greater number of well-paid jobs. And this is only the beginning: high-tech companies in Calgary are growing like mushrooms after the rain!
Today, Calgary ranks first in all of North America for job growth in the high-tech sector. In addition, due to high energy prices, oil and gas companies are returning to the Calgary market. And although today 80% of the province’s GDP already comes not from the oil sector but from IT and technology, the energy sector has also brought thousands of jobs back to Calgary. Naturally, a large number of people have moved — and continue to move — to Calgary. Real estate has become extremely sought after, and since the end of 2020, both purchase prices and rental prices have risen sharply.
Today, Calgary has the lowest vacancy rate in all of Canada — only 0.6% — while rental prices are just 25% lower than in Ontario. Unlike Toronto, where real estate prices are now correcting and where we have clearly entered a period of stagnation for at least the next year and a half, there is no sign of a crisis in Calgary.
Beyond Alberta’s tax advantages, another important factor is the presence of a large pool of highly qualified professionals, supported by four major universities. Calgary’s authorities have also acted intelligently here, creating excellent conditions for international students.
As a result, Calgary has become the fastest-growing city in Canada, and in June of this year it was recognized as the most livable city in all of North America. Calgary’s population growth is driven not primarily by foreign immigration, but by people moving here from other provinces — mostly from Ontario and British Columbia. As a rule, these are people with savings who are trying to buy property here as quickly as possible, because they can see prices rising day by day while housing still remains very affordable. The average household income in Calgary is now $116,000 per year, which is $10,000 higher than in Toronto, while real estate prices are still more than twice as low. Let me give you several examples of projects our company is currently selling.
Recognizing the serious shortage of housing in the province, Alberta has also created ideal conditions for real estate investors. I do not think this will last forever, so this is clearly a moment that should be used wisely.
Today, there is no 15% foreign buyer tax here, no rent control, no land transfer tax, and no development charges on new construction. Investors also do not need to pay and later recover the $24,000 HST rebate we are used to in Toronto. In other words, closing costs on new construction amount to only about two thousand dollars, unlike the very substantial costs in Ontario.
And finally, the deposit paid when purchasing property at the pre-construction stage is one of the most important factors affecting the return on investment. The smaller the deposit, the higher the return. In Calgary, across all projects, the deposit is 10% of the property price — not 15% or 20% as in Toronto — because Calgary, unlike Toronto, has completely different conditions for developers when obtaining construction financing.
Three weeks ago, I returned from a business trip to Calgary, and a full series of video reports about life and real estate in Calgary has already been released on our YouTube channel, newGTAcondos. I strongly recommend watching them for anyone planning to invest in Calgary.