The following is today’s Daily Economic Comment from ATB Financial:
Alberta real estate has marched to its own rhythm for the better part of a decade now. The real estate craze that has gripped most of the nation since 2009 has largely bypassed a province where the memory of a bursting real estate bubble was still fresh. Over the years, Alberta has managed what is hoped the rest of the country will experience: a soft landing.
A soft landing in real estate happens when, after a spell of exuberance in the market, balance is restored—without any major correction in price. Instead, the market returns to balance as time takes its toll. Over time, wages increase, inflation occurs and the population grows. This is largely what happens with these real estate markets, as homeowners tend to pull listings when the market cools, stemming price declines.
Home prices have been very stable in Alberta’s major markets over the last four years, with average annual price increases often coming in lower than the inflation rate. But there are small signs that prices are starting to move higher. According to the local real estate boards, average home prices in Edmonton and Calgary stood at $331,000 and $429,000 in November, respectively. Year over year, this represents a jump of 3.1 per cent in Edmonton and 4.2 per cent in Calgary (with some of the weakness over the summer months likely related to new mortgage rules).
Slowly, the local housing market is burning off whatever excesses existed. Wages have been rising steadily, migration figures are at boom time levels and ultra low interest rates persist. All of these are factors that increase the affordability of housing in the province, differentiating Alberta’s housing market from the rest of the country.