Is the rebound in the Alberta housing market complete?

While many regions in Canada experienced a boom following the first wave of the coronavirus pandemic, the Alberta real estate market took some time to see growth in sales activity and prices. From the collapse in energy prices to the economic impacts of the lockdowns, the Alberta economy was reeling through much of 2020.

Now, fast-forward to the present day, and it seems all of that is ancient history. The energy market is soaring, the province is beginning to open again, and the real estate industry is growing. Could this western province return to its economic powerhouse status, and what might this mean for the real estate market and housing affordability in the region?

Let’s take a look at January data, for insight into what the future may hold for Alberta real estate.

Alberta Housing Market Bouncing Back

According to the Alberta Real Estate Association (AREA), residential property sales soared at an annualized rate of 26.6 per cent in January, totalling 5,085 units.

Vigorous sales activity was coupled with exceptional gains in house prices, AREA data show.

January saw the average home price climb 9.9 per cent year-over-year, to $443,398. In fact, all four property types recorded notable increases on a year-over-year basis:

• Detached: +13.8% to $511,753
• Semi-Detached: +12.9% to $441,979
• Townhome / Row: +4.5% to $298,786
• Apartment: +6.7% to $249,454

Housing supply has been a significant factor in the affordability crisis gripping the nation today, including the Alberta housing market. New residential listings declined 7.3 per cent to 7,158 units in January, while active listings plunged 27.2 per cent to 14,066 units.

Months of inventory, which measures the number of months it would take to exhaust current supply at the present rate of sales activity, fell 4.24 per cent to 2.77 months.

Here’s a regional look at market activity across Alberta in January:

Calgary

• Sales: +66% to 2,008 units
• Price: +8% to $510,641
• Months of Inventory: -61% to 1.31

Edmonton

• Sales: +20% to 980 units
• Price: +3% to $375,725
• Months of Inventory: -26% to 3.65

Red Deer

• Sales: +24% to 124 units
• Price: -5% to $312,526
• Months of Inventory: -15% to 3.24

Lethbridge

• Sales: +28% to 122 units
• Price: +12% to $342,778
• Months of Inventory: -48% to 2.8

Overall, according to AREA, this is the tightest market the province has witnessed in 15 years.

“Strong sales and lower inventory levels have caused the months of supply to fall below three months in the province, reflecting the tightest January since 2007. Tight conditions across most of the province have generally supported price growth,” the real estate association said.

But could this tight market ease? New housing construction data provides some optimism that relief could be coming soon. According to Canada Mortgage and Housing Corporation (CMHC), housing starts advanced 32.8 per cent to 30,612 units in 2021, compared to the previous year.

Despite this additional supply, the province will likely remain a seller’s market until supply outpaces demand.

RBC Economics agrees, writing in a research note that Alberta is “where conditions have tightened considerably through the fall.”

A Look at the 2022 Alberta Housing Market

Looking ahead, RBC and its analysts are monitoring interest rates and public policy pursuits as the potential “wildcards” in 2022 and beyond. “We expect new policy initiatives will be announced this year. Our view is expediting new supply should be a priority though it’s unclear what policymakers will ultimately do and when. We’ll continue to monitor the situation closely,” the bank stated.

But, according to the RE/MAX 2022 Canadian Housing Market Outlook, Alberta’s two biggest markets, Edmonton and Calgary, are forecasted to see more growth in 2022. The report projects the Calgary real estate market could see prices climb 2.5 per cent to $506,685, while the Edmonton housing sector will experience prices rise seven per cent to $404,297.

Citing RBC’s provincial outlook, RE/MAX anticipates big things for the western province, driven by greater provincial migration, an economic recovery, and municipalities welcoming more significant capital investment.

Indeed, the latest Statistics Canada data show that Alberta gained close to 4,500 residents from inter-provincial migration during the pandemic.

Whatever the case may be, Alberta and other prairie regions may have an advantage over other markets across Canada, from the renewed boom in the resource sector to relatively better housing affordability. Whether the province can continue attracting and retaining this population boom and broader economic growth remains to be seen. But the future of Edmonton, Calgary, and the rest of the province, looks bright.

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