Economic insight provided by Alberta Central Chief Economist Charles St-Arnaud.
The housing market activity level remains well above its pre-pandemic one, supported by changes in housing preferences and historically low interest rates. Moreover, historically low inventory levels in many markets continue to push house prices higher across the country.
In Alberta, housing market activity set another record in February. However, the province’s price increases continue to be weaker than in the rest of the country due to higher inventories. However, 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 (see) However, continued lack of supply in many regions and increased immigration are expected to continue to provide support.
Activity in the Canadian housing market increased by 4.6% m-o-m seasonally-adjusted in February. The number of transactions remained elevated, about 42% 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 rose the most on the month in Alberta, Manitoba, Saskatchewan and Ontario, while it declined in Newfoundland, PEI, Nova Scotia, New Brunswick, and Quebec. In Alberta, the number of transactions rose 14.6% m-o-m in February and is about 127% 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 42% in Canada, led by Alberta (+127%), Newfoundland (+84%), BC (+57%), and Saskatchewan (+50%).
New listings increased by 23.7% m-o-m seasonally-adjusted in February. All provinces saw a rise in new listings, in part due to the end of the Omicron wave, led by Alberta (+37%), New Brunswick (+36%), Manitoba (-25%), Ontario (+34%) and Ontario (+34%).
With sales activity stronger than listing in most regions, the month-of-supply measure remained stable at 1.6 nationally, its lowest on record. 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 at its tightest since 2007.
With the continued solid sales performances and the low month-of-inventory, we continue to see upside pressures on house prices, with the MLS House Price Index increasing by 3.5% m-o-m in February. Compared to last year, house prices rose nationally by 29.1%, its strongest on record. The biggest monthly changes were in Guelph (+6.1% m-o-m), Calgary (+4.9% m-o-m), Fraser Valley (+4.5% m-o-m), Hamilton-Burlington (+4.2% m-o-m), and Greater Toronto (+4.1% m-o-m).
On a y-o-y basis, the most significant increases were in Oakville-Milton (+38%), Barrie (+37%), Moncton (+35% y-o-y), Vancouver Island (+34%), and Okanagan (+34% y-o-y).
In Alberta, benchmark prices rose by 4.9% m-o-m in January in Calgary, the strongest since 2006, and by 15.7% y-o-y, strongest since 2007. In Edmonton, prices increased by 2.1% m-o-m in Edmonton (+6.9% y-o-y). Edmonton continued to have some of the weakest price increases in the country. However, prices in Calgary are picking up rapidly, as inventories is declining.
In Alberta, the housing market improved further, 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 127%, led by Calgary (140%), South Central Alberta (+94%), Central Alberta (+87%), Edmonton (+66%), and Lloydminster (+62%). Activity is the weakest in Grande Prairie (+17%) but still well above its pre-pandemic level.
New listings rose on the month at the provincial level and continue to lag the increase in sales generally. Compared to the average level of new listings in 2019, new supply in the province increased by 39%, led by Calgary (+84%), Edmonton (+18%) and South Central Alberta (+15%). New supply is the weakest in Alberta West (-14%), Medicine Hat (-10%), and Lloydminster (-8%).
With sales stronger than new listings, all 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, Fort McMurray and South Central Alberta.
With the further tightening of the housing markets, average house prices have risen in some regions on a 3-month moving average of the year-on-year, with the most significant increase in Calgary (+10.9%), Lethbridge (+8.7%) and Edmonton (5.7%). On the flip side, Western Alberta (-1.7%) and Lloydminster (-1.2%) saw declines in average house prices over the same period. The decline in Alberta West seems to be the result of continue weak sales at the top-end of the market. 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.
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