The Alberta real estate market has been holding steady after experiencing a downturn last year. In fact, based on some metrics, the province’s housing sector is on the rebound, be it the revival in townhome prices or the jump in sales on a month-over-month basis.
According to the Alberta Real Estate Association (AREA), the average price for a home sold in April was flat at zero per cent year-over-year, coming in at $462,086. But all the residential property types have increased from the same time a year ago.
The average price for detached homes rose at an annualized pace of 1.1 per cent to nearly $550,000. Semi-detached prices surged 4.5 per cent to $463,275. Townhomes climbed 3.7 per cent to $342,923, while apartments surged close to seven per cent to $264,371.
The number of residential property sales collapsed nearly 28 per cent from the same time a year ago, but they have been inching higher from month to month.
Meanwhile, other notable association statistics:
- New Listings: -28.1 per cent to 10,488 units
- Inventories: -5.6 per cent to 19,985 units
- Months of Supply: +30.3 per cent to 2.79
- Housing Starts: -32 percent to 2,402 units
So, what exactly is driving the western province’s housing performance? Let’s find out.
5 Things Driving Alberta Home Prices
Here are the five things driving Alberta home prices:
#1 Population Growth
Official government statistics show that Alberta’s population rose one percent in the fourth quarter, as the province added nearly 46,000 residents. Thanks to significant international net migration and interprovincial movement, Alberta continues to lead the nation. In addition, the province has noted that “Alberta still has the highest natural growth rate, the youngest average age, as well as the lowest proportion of people aged 65 and over.”
In total, Alberta’s average annual population growth rate was 3.7 per cent from January 2022 to January 2023.
But why would population growth push up home prices? The main factor is that with housing stocks sliding, there will be more competition for a smaller inventory of residential properties. This was evident during the coronavirus pandemic, as many Canadian households travelled across the country to take advantage of more affordable housing prices.
While mortgage rates are still closer to six percent, mortgage lending conditions have stabilized, with the fixed five-year rate ranging between 5.75 per cent and 5.89 per cent since September 2022. After peaking last fall, the benchmark ten-year bond, which influences mortgage rates, has been mostly on a downward trajectory. The yield has risen in recent weeks after an unexpected jump in inflation in April, which prompted investors to speculate that the Bank of Canada (BoC) would raise interest rates, but it is lower than the 2023 high of about 3.5 per cent.
In addition, short-term government bond yields have also been trending higher in May, with the one- and three-year yields touching 4.68 per cent and 3.65 per cent, respectively.
That said, market experts argue that mortgage rates are unlikely to dramatically increase as they did in the early days of the central bank’s tightening cycle. This is good news for homebuyers trying to finance the most significant purchase decision in their lifetime.
#3 Alberta Economy
The Alberta economy is doing well right now, despite the rest of the country showing signs of slowing down.
The unemployment rate is below six percent, nearly two million people are full-time employed, average weekly earnings were up more than one percent in February, the GDP per capita climbed two percent to above $73,000, and the GDP at market prices surged nearly five percent to $335.6 billion.
In addition, the province is also benefiting from elevated energy prices, with West Texas Intermediate (WTI) and Brent crude oil prices above $71 a barrel, and the Western Canada Select (WCS) is above $50. Crude production is above 19 million barrels.
Overall, when the Albertan economy is strong, the provincial real estate market is as vigorous due to robust demand. However, if Alberta joins the rest of the country and the economy grinds to a halt, then it might impact the housing sector. Remember, Calgary now has the highest unemployment rate among major urban centres at 6.4 per cent.
#4 Consumer Confidence
The latest polling data from Nanos Research show that the number of Canadians anticipating home values to rise to 42 per cent in May, up from the 2023 bottom of 19 per cent in February. Moreover, the same research confirms that the number of Canadians with a generally positive outlook is above 50 per cent. Should confidence in the national economy and the Canadian real estate market holds up, this would keep demand for housing elevated.
The dramatic pandemic-era housing price increase allowed homeowners to accumulate tremendous levels of equity and savings. This development supported households who wanted to purchase another residential property, whether to upsize or relocate to another city. There is debate if this equity injection has been spent amid 30-year high inflation. However, if many households still possess their crisis-era gains, they should also support the Alberta real estate market.
What Does the Future Hold for Alberta Housing?
Most Albertans anticipate a recession in 2023 or 2024. Many households are a few hundred dollars away from insolvency. Statistics Canada suggests much of the pandemic-era savings accumulation has been exhausted. Whatever the case may be, industry observers believe the Alberta real estate market will hold steady, mainly because it continues to offer housing affordability, be it in Edmonton or rural communities. While it is subjected to volatility amid the ebb and flow of energy prices, the diversification of the provincial economy has enabled it to weather the storm.