Rising interest rates reshape real estate landscape in Calgary.
March 14, 2024, By Snehpreet Kaur
According to Calgary Real Estate Board, since 2021, sales of houses in Calgary have fallen over 20 per cent.
Gagandeep Sharma, a mortgage broker working in Enrich Houses said, “due to the increase in interest rates, the demand for houses has decreased for short term.”
With the Bank of Canada tightening its monetary policy to curb inflation, homebuyers in Calgary are facing increased borrowing costs, impacting both affordability and demand.
The central bank raised interest rates 10 times between March 2022 and July 2023.
The increase in interest rates is making it hard for everyone to buy new houses.
Sharma said, “interest rates have been increasing in the past 2 years, and it has increased the borrowing cost.”
Gagandeep Sharma, mortgage broker at Enrich Homes, working in his office space. Picture by Snehpreet Kaur.
People are working hard to pay- off their increased mortgages.
Sukhdeep Johal, a house owner in North-East Calgary said, “my monthly mortgage is just 700 but I pay 2100 with interest which is 3 times!” Johal added, “I cannot pay that by working for 40 hours, I have to work 60 hours each week to cover that amount.”
The increasing interest rates do not only affect the house owners but also the tenants.
Sharma said, “to make the positive flow of the income, the house owners increased the rents."
The purchase of rental property decreased too due to the hike.
Realtor.com said 2023 was on track for the largest annual drop in investor buying activity in at least 20 years.
The increase in the interest rates of houses has affected the population of Calgary.
According to The City of Calgary, “in 2021, the population of Calgary was 1,306,780, up 5.5 per cent from 1,239,220 in 2016.” This increase is because of people moving from different parts of the country.
Sharma said, “it was hard for people living in the big cities like Toronto and Vancouver to afford a house because of its cost, hence they moved to smaller cities like Calgary.”
Private lenders have gained a lot from the current hike in interest rates.
Sharma said, “Few people were able to qualify for loans; to solve this problem private lenders came into the market.”
The interest rates not only affect one segment of a person’s life but the others as well.
Johal said, “I’ve had to cut back on spending and prioritize essentials to accommodate the higher mortgage payments. It's forced me to tighten my budget significantly."
However, there was no change in the purchase of non-residential property in Calgary,
According to the report from The City of Calgary, “The non-residential sector remains stable with property values continuing to show resiliency. Industrial properties are outpacing other sector properties due to the sustained demand as Calgary remains a major distribution hub.”
Gagandeep Sharma, mortgage broker at Enrich Homes, in his office. Picture by Snehpreet Kaur.
