Economic insight provided by Alberta Central Chief Economist Charles St-Arnaud.
Despite a moderation in March, the level of activity in the housing market remains well above pre-pandemic, supported by changes in housing preferences and historically low interest rates. Moreover, low inventory levels in many markets continue to push house prices higher across the country.
In Alberta, housing market activity eased but remained close to a record. Prices increase in the province’s metropolitan area in were amongst the strongest in the country but remain weaker on a year-on-year basis. The continued improvement in the oil sector, with the value of oil production reaching records in recent months, will be a tailwind on household income and the recovery, providing some support to the housing market in the coming months. In addition, signs of increased migration and buyers from other provinces will also support activity and prices.
Low interest rates are one of the main drivers of the housing market. It raises questions as to what impact a normalization in interest rate will have, especially with the Bank of Canada has increased its policy rate by 75bp so far this year and is expected to continue to hike aggressively (see). However, continued lack of supply in many regions and increased immigration are expected to continue to provide some support.
Activity in the Canadian housing market decreased by 5.4% m-o-m seasonally-adjusted in March. However, the number of transactions remained elevated, about 34% higher than on average in 2019. It is important to note that all the year-on-year comparisons are distorted by the sharp boom in activity a year ago and, as a result, we will focus on the changes compared to 2019. Activity declined the most on the month in Ontario, Newfoundland and Alberta, while it increased in New Brunswick, Nova Scotia and PEI. In Alberta, the number of transactions decreased 5.3% m-o-m in March after hitting an all-time high the previous month and is about 116% higher than in 2019.
The level of activity in every provincial market remains well above the level seen pre-pandemic, as pent-up demand, changing housing preferences and low interest rates continue to support sales activity. Compared to the average level of 2019, the number of transactions is above its pre-pandemic level by 34% in Canada, led by Alberta (+116%), Newfoundland (+65%), BC (+54%), and Saskatchewan (+53%).
New listings decreased by 5.5% m-o-m seasonally-adjusted in March. Most provinces saw a decline in new listings, led by PEI (-25% m-o-m), BC(-17% m-o-m), Saskatchewan (-9% m-o-m) and Newfoundland (-9% m-o-m). New listings rose in Manitoba (+3.5% m-o-m) and Quebec (+3% m-o-m).
With sales activity weaker than listings in most regions, the month-of-supply measure eased to 1.8 nationally. Based on this measure, all provinces are seller’s markets in Canada, led by New Brunswick, Quebec, Nova Scotia and Ontario. With a month-of-supply at 1.9, Alberta’s housing market is close to its tightest since 2007.
With sales performances moderating and an increase in the month-of-inventory, upside pressures on house prices eased in March, with the MLS House Price Index increasing by 1.0% m-o-m in March. Compared to last year, house prices rose nationally by 26.1%, still close to a record pace. The biggest monthly changes were in Calgary (+3.1% m-o-m), Moncton (+2.9% m-o-m), Victoria (+2.7% m-o-m) and Edmonton (+2.6% m-o-m).
On a y-o-y basis, the most significant increases were in Moncton (+37% y-o-y), Oakville-Milton (+36%), Barrie (+35%), Toronto (+35%), and Vancouver Island (+34% m-o-m).
In Alberta, benchmark prices rose by 3.1% m-o-m in January in Calgary, and by 17.2% y-o-y, strongest since 2007. In Edmonton, prices increased by 2.6% m-o-m in Edmonton (+9.3% y-o-y). Edmonton continued to have some of the weakest price increases in the country. However, prices in Calgary have picked up sharply, as inventory declines.
In Alberta, despite a moderation in activity in March, the housing market remains robust, with the level of transactions still well above their pre-pandemic level and above to the record seen in Spring 2021. The number of transactions is higher than last year’s same month in almost all regions. (see table below for details). Compared to the average level of transactions in 2019, activity in the province increased by 116%, led by Calgary (144%), Central Alberta (+129%), Edmonton (+108%), and South Central Alberta (+106%). Activity is the weakest in Grande Prairie (+32%) but still well above its pre-pandemic level.
New listings declined on the month at the provincial level, but more than the moderation in sales. Compared to the average level of new listings in 2019, new supply in the province increased by 39%, led by Calgary (+83%), Edmonton (+19%) and South Central Alberta (+19%). New supply is the weakest in Alberta West (-13%), Medicine Hat (-10%), and Lloydminster (-8%).
With sales stronger than new listings, many regions have seen a tightening of their housing markets. The primary seller’s markets are Calgary, Lethbridge, Medicine Hat and Central Alberta, while the main buyer’s markets are Grande Prairie, Lloydminster, and Fort McMurray.
With the further tightening of the housing markets, average house prices have risen in almost all regions on a 3-month moving average of the year-on-year, with the most significant increase in Calgary (+10.6%), Lethbridge (+8.7%) and Edmonton (6.3%). On the flip side, Medicine Hat (-3.2%) saw a decline in average house prices over the same period.
 The month of supply measures how many months is would take at current sales volume and without an increase in listings to bring inventories to 0.
The views and opinions expressed in this publication are solely and independently those of the author and do not necessarily reflect the views and opinions of any organization or person in any way affiliated with the author including, without limitation, any current or past employers of the author. While reasonable effort was taken to ensure the information and analysis in this publication is accurate, it has been prepared solely for general informational purposes. There are no warranties or representations being provided with respect to the accuracy and completeness of the content in this publication. Nothing in this publication should be construed as providing professional advice on the matters discussed. The author does not assume any liability arising from any form of reliance on this publication.
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