Still Affordable

With strong economic growth expected to continue into 2013, some say Alberta’s recent real estate market “renaissance” is just getting started.

“The Alberta housing market enjoyed an unusual mix of factors in the third quarter: firm and steady resale activity, balanced demand-supply conditions (if marginally tight), moderate home price increases, and attractive and improving affordability,” said an RBC Housing Trends and Affordability report.

When compared to the rest of the country, Alberta is an attractive place to call home as far as affordability is concerned. In Calgary, residents who purchased a standard two-storey home in the third quarter of this year spent 39.3 per cent of their median pre-tax income compared to 61 per cent in Toronto and 87 per cent in Vancouver.

The Vancouver-area remained the least affordable market in Canada despite a third quarter decline of between two and 3.7 per cent — coming on the heels of increases in the two previous quarters.

“Affordability levels in (British Columbia) are just slightly worse than they have been on average since the mid 1980s but they remain still well below the corresponding national averages,” said the report.

Ontario also saw a decline in home prices in the third quarter after seeing increases in both the first and second quarters.

“Slower home resale activity through the spring and summer amid greater availability of homes for sale released much of the heat that prevailed earlier this year in the provincial market and caused a notable moderation in the rate of property appreciation in the third quarter,” stated the report.

Ontario also saw a decline in home prices in the third quarter after seeing increases in both the first and second quarters.

“Slower home resale activity through the spring and summer amid greater availability of homes for sale released much of the heat that prevailed earlier this year in the provincial market and caused a notable moderation in the rate of property appreciation in the third quarter,” stated the report.

According to one economist, it’s Calgary’s time to shine after the fallout from the boom of 2005 to 2007.

“Calgary’s housing market has been held back for several years as the consequence of the deflation of an over-heated market, which had developed during 2005 to 2007,” said Will Dunning, chief economist for the Canadian Association for Accredited Mortgage Professionals (CAAMP).

“The last few years, activity has been slower than it should have been, given economic conditions such as job creation and interest rates. We have seen other examples in the past whereby similar deflation, by weighing on consumer confidence, has resulted in under-performance that lasts for several years.”

According to the Canada Mortgage and Housing Corporation (CMHC), sales in Calgary are forecast to increase 16 per cent by the end of 2012 reaching its highest point (26,000 units) since the boom of 2007. A number that will slow but still show improvement into the new year.

“In 2013, modestly higher mortgagerates, combined with a slower pace of job creation and net migration, will moderate sales growth,” said Richard Cho, senior market analyst for CMHC. “MLS® residential sales are anticipated to rise two per cent to 26,500 units.”

Home sales aren’t the only thing shadowing the 2007 boom in Calgary. According to the 2012 Civic Census results, net migration numbers were similar to levels seen during the boom with 19,658 additional residents moving to the city.

Part of the Alberta appeal is the draw for jobs as 36,000 new jobs have been created in the province in the last 12 months said ATB senior economist Todd Hirsch. Of those jobs, the construction sector leads the way with almost 18,000 new jobs followed by the gas sector with 16,600 new jobs. In that same time however, the retail and wholesale sector lost almost 15,000 jobs while culture and recreation decreased by more than 11,000.

“The shift in employment by industry is both good an bad news for the province,” said Hirsch.

“The good news is that jobs in construction, oil and gas, and professional, scientific and technical services are generally very high paying. On the other hand, retail and wholesale jobs tend to be some of the lowest on the pay scale. This relative shift in employment has been one reason why average weekly earnings in Alberta are the highest in the country — and those earnings continue to row at a rate well about the rate of inflation.”

Leave a Reply

Your email address will not be published. Required fields are marked *