Oil prices are rebounding. The national economy is shifting into recovery mode. There is light at the end of the tunnel in this coronavirus pandemic. How could anyone not be positive right now?
It was a challenging 2020 for the Alberta real estate market. As many of its provincial counterparts experienced record growth, from sales activity to housing prices, Alberta struggled to replicate this performance. But hope was not lost for the oil-rich economy as the province turned things around and ended the year on a high note as many cities finished 2020 with impressive numbers.
In Edmonton, for example, residential sales surged 31.47 per cent year-over-year in December, and residential average prices jumped 2.61 per cent to $362,447. Calgary enjoyed a strong second half, with January sales climbing to a 13-year high and average prices rising at an annualised rate of two per cent. Even Fort McMurray, which took a significant hit during last year’s crash in crude oil markets, is springing back to life, with home inventories falling to levels unseen in more than a decade.
This has been a common theme throughout the province of Alberta: declining or stagnant housing stocks. The demand for real estate across Alberta has strengthened in recent months, but supply has failed to keep up, and this could see the housing sector expand even more in 2021.
Indeed, the Alberta real estate market is trending upwards for 2021, and as long as interest rates remain near zero and homebuyers’ trends evolve, the housing sector in the province could return to pre-pandemic levels soon. For now, real estate agents will be combing through some technical data to see where the Alberta housing market could be heading over the next 12 to 18 months. One of the key pieces of data garnering much attention? Housing starts.
Where are the Most Housing Starts in the Alberta Real Estate Market?
Housing starts in Alberta have declined over the last year, despite low borrowing costs that would, in theory, lead to greater construction projects. What do the Statistics Canada numbers show?
In December 2020, there were 2,439 urban housing starts, down 21.3 per cent from the same time in the previous year. Single-detached units increased 10 per cent, while apartment units tumbled by 35.9 per cent. From January to December, housing starts fell 11.2 per cent to 23,042.
A drop in housing starts can also be seen in many of the province’s major markets. Here are some of the housing starts and completions data from some of Alberta’s key regions in 2020 at an annualized rate.
Housing Starts: -22.45 per cent to 9,235
Housing Starts: +7.38 per cent to 11,512
Housing Starts: -21.66 per cent to 499
Housing Starts: -29.91 per cent to 171
Wood Buffalo (Fort McMurray)
Housing Starts: -59 per cent to 59
Nationally, housing starts were on a downward trend, according to the Canada Mortgage and Housing Corporation (CMHC). The latest data (December) shows that housing starts decreased by 12.6 per cent to an annualised rate of 228,300 units, falling short of the Bloomberg median estimate of 230,000 units. Construction of new multi-family homes slipped by 15 per cent in December, and construction of single-family homes declined by six per cent.
Market observers suggest that this could be the start of the real estate market taking a breather following the monumental growth throughout the coronavirus pandemic.
Is the Alberta Housing Market Strong Enough to Survive?
The post-coronavirus economy may have served as a wake-up call for Alberta.
Given the volatility of the oil and energy sector over the past year, it has become apparent that the province’s reliance upon a single industry isn’t working in their favour. While some jurisdictions across the province have successfully diversified their economies (notably Edmonton, which coincidentally is the only major Alberta market with positive growth of housing starts), the broader province is still focused on energy, the impacts of which may trickle into the Alberta real estate market in the long-term.
Still, historically low interest rates, immigration inevitably returning to pre-pandemic levels, and the revival of crude prices can buy Alberta some time to adapt to the changing landscape while posting economic gains in the process. This could serve as an excellent opportunity for homebuyers to scoop up real estate in Canada’s westernmost prairie province as it attempts to go through a makeover in the aftermath of the pandemic.
Right now, Alberta is the ideal homebuyer’s market, and as long as it maintains these conditions, it will continue to attract demand as other hot (and expensive!) local markets across the country are becoming virtually inaccessible for many first time home buyers.