We have observed a major change in the inner city Infill property market over the last year or so. There is a surplus of product on the market, leading to oversupply and lower prices. This is most prevalent in the semi detached market that we follow closely, and slightly less so in the townhouse market. These are the two areas we specialize in building, so of course this is a major concern for us.
What hasn't changed is the lack of developable land for multi family projects anywhere in the inner city. While there is quite a good selection of r2 zoned land (at strong prices, but lower than in the past), any zoning category that allows medium density development is in short supply. This is largely due to the slow progress made by the city in blanket rezoning of areas with outdated land use patterns. These areas have been starved of private investment to redevelop, because the zoning available doesn't reflect the type of housing the market wants to buy. There is some rezoning happening in capital hill and Banff trail neighbourhoods via a multi year planning initiative, which we support, and we are considering land acquisition in those communities (but of course there are few if any parcels ever available to purchase).
We expect that once the recession ends we will quickly be in a position where we face a major shortage of buildable multi family sites. This will, no doubt, drive up prices quickly as builders scramble for land. In the established communities that have multi family zoned areas, the land is either built up, or simply not for sale.
Another interesting local market phenomenon is stubborn builders. We know of a few complete and unsold multi family projects where the builders are content to hold the inventory and refuse to budge on price. This seems to be a costly and foolhardy approach to adjusting to market realities. We suspect the builder in this scenario has deep pockets and hasn't purchased or can't find more multi family land. In his view, to discount his finished homes makes no sense, because he can't build the same project again due to lack of land supply, and if the market turns better he would have been better off just hanging on.
These are some of the market distortions caused by artificial shortages where the land use pattern in a city is not market driven. Calgary has a reputation as an entrepreneurial centre of Calgary, but when it comes to residential building, the market is rarely considered by the various interests that control development.
Here is a capital hill reZone map where the ends of the blocks are to be rezoned for multi family development. This being completed would make for at least some new supply for builders to purchase. Pickings are very slim elsewhere in the city.