Despite rocketing prices, thousands of people are still eager to join the real estate game in Calgary. After all, prices are only going to continue to climb, right? Once reserved for downsizers and first-time buyers, condos are quickly becoming the popular alternative for every demographic thanks to the slightly lower price tag. Don’t be mistaken, prices are rising across every real estate market and condos are no exception, says Streetside Development Corporation’s sales manager Wendy Jabusch.

“Our industry is absolutely concerned about affordability.  Rising costs are due to both material and labour,” says Jabusch. “Last fall there was a concrete shortage, early winter the flooring suppliers were getting price increases every 30 days, next it was electrical wiring and so on.”

The trickle down effect of rising material costs is definitely wreaking havoc on the way condos are being built, adds Barry Chow, principal of Resiance Corporation.

“There are some very obvious factors that have led our market to where it is today. The price of materials continues to go up across the world economy.  In fact, the demand is for these materials are greater than any other time I have seen,” says Chow. “It’s really a case of macroeconomic fundamentals causing the regional market in Alberta, as a whole, to go bananas.”

While our city’s booming economy continues to attract Canadians eager to be a part of our affluent city, it has some downsides, including an undeniable labour shortage. Just take a quick drive around the city streets and count the Help Wanted signs flashing in every window and no where is that more evident than in the world of trades, which is definitely shaking up the homebuilding industry, adds Jabusch. “The labour shortage is genuine and real.  All industries are having trouble finding qualified staff so there is a definite upward pressure on wages.”

Above and beyond the obvious wage pressures, trade shortages are affecting the price and the schedule of construction on many condos, leading many projects to take a lot longer and cost a lot more than projected.
Purchasing a unit at the pre-sale stage in today’s unstable market can be a stressful venture for eager buyers.

After all, a unit that may have been projected to cost $300,000 a year ago could cost as much as $400,000 now. So how can you protect yourself? The key to making sure your investment is safe, is to clearly understand your role in the purchase agreement from start to finish.

According to the Alberta New Home Warranty Program, developers will typically ask for cash to secure your intent to purchase called a reservation. This is not to be confused with a deposit or a down payment.
 
“The amount of this reservation may be small but it reserves for you the right to purchase the unit of your choice at an agreed price even if all the required disclosure documents, specifically the registered Condominium Plan, are not available to you at the time,” states the website.

Once you have decided to go ahead with the purchase, you should always make sure that you read the fine print. Some potential buyers are shocked to learn that the developer may reserve the right to increase the price of the unit closer to occupation to offset the rising construction costs. Ensuring you can choose to pay the increase cost or walk away from the deal, can protect you from entering a stressful situation – simply put, do your homework before you sign any legally binding document.

While the cost of materials and the frustrating labour shortages are out of the developers’ control, many are doing whatever they can to stabilize the prices for their customers, says Chow. “The fact is that there is a chain involved in putting together a home. We make use of products and services and when those prices rise or become less attainable that can affect the efficiency of the entire chain.”

From shortening selection times to using a vertically integrated approach, developers are making affordability a top priority. “At Resiance, we act as our own general contractor and are thoroughly involved in every aspect of our designs from the marketing to the construction,” says Chow. For Streetside, asking customers to make their finishing selections earlier can help ease the stressful side effects of material shortages, adds Jabusch.

“Streetside's approach to maintaining as affordability as much as possible is to try to eliminate customization - ordering many of the same items is more economical than different versions of it.  We are also asking customers to complete their selections as early as possible so the orders can be placed well ahead of time and hopefully there will be no delays on site.”

It’s a different market today than it was a decade ago, requiring developers to really examine the way they approach every project. “The challenge isn’t just maintaining our standards, its discovering new ways to excel at those standards in such a challenging market,” says Chow.   CL