Economic insight provided by Alberta Central Chief Economist Charles St-Arnaud. 

Bottom line

National house prices declined for an eighth consecutive month. Since the start of the correction, prices nationally have fallen by 10%. However, the correction has been bigger in some markets, especially those with the most significant post-pandemic gains. Rising interest rates since the start of the year have had a cooling impact on the housing market, especially with most rate hikes expected before the end of the year.

In Alberta, housing market activity eased but remained robust by historical standards. We note a divergence between the metropolitan area, with Calgary amongst the strongest cities in Canada while Edmonton is amongst the weakest. With less froth accumulated during the pandemic, Alberta’s market is less prone to a sharp correction than other regions, notably Ontario. In addition, increased migration to Alberta will also support activity and prices compared to elsewhere in the country.

Low interest rates have been one of the main drivers of the housing market, supporting affordability. The moderation in activity since the Bank of Canada started to raise rates in March points to further weakness this year, especially with the policy rate having increased 350bp since the beginning of the year and likely to rise by another 25bp before the end of year. However, the continued lack of supply in many regions and increased immigration could provide some support.

Activity in the Canadian housing market increased by 1.3% m-o-m seasonally-adjusted in October, ending a stretch of seven consecutive months of decline. The number of transactions, at 35.4k, is about 14% lower than on average in 2019 and 36.3% lower than for the same month last year. 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 improved in all provinces, except for Quebec and Newfoundland. It rose the most in PEI (after being affected by hurricane Fiona), BC and Manitoba. In Alberta, the number of transactions increased by 2.2% m-o-m in October, also ending a stretch of seven consecutive months of decline. Activity is about 33% higher than in 2019.

Despite the correction nationally, there are some divergences between provincial markets. Compared to the average level of 2019, the number of transactions is well above its pre-pandemic level in Saskatchewan (+33%), Alberta (+33%), and Newfoundland (+32%). On the flip side, activity is well below in Ontario (-27%), Quebec (-19%), and BC (-16%).

New listings rose by 2.2% m-o-m seasonally-adjusted in October. Most provinces saw an increase in new listings, except for Quebec (-1.4% m-o-m), New Brunswick (-1.3% m-o-m), and Newfoundland (-0.9% m-o-m). The biggest gains were in PEI (+11.8% m-o-m), BC +4.7% m-o-m) and Ontario (+3.4% m-o-m). In Alberta, new listings were higher by 0.4% m-o-m.

With sales activity weaker than listings in most regions, the month-of-supply measure[1] eased to 3.8 nationally, still below its pre-pandemic level, but 2.1 months higher than its recent low. Based on this measure, most provinces have seen an increase in inventories but are still below their 2019 levels, with the exception of Ontario. Compared to the lowest level of inventory over the past two years, the month-of-supply has increased the most in BC (+3.5 months), PEI (+3.0 months), Quebec (+2.4 months), and Ontario (+2.0 months). It has increased the least in Newfoundland (+0.5 months), Saskatchewan (+0.9 months), and Manitoba (+1.3 months). With a month-of-supply at 3.6, Alberta’s housing market remains much tighter than before the pandemic (7.0 months on average in 2019).

With sales moderating and increasing inventories, the MLS House Price Index declined by 1.2% m-o-m, its eighth consecutive month of decline. Compared to last year, house prices eased nationally by 0.4%, the first year-over-year decline since November 2019. All areas saw a decrease in prices on the month, except for Calgary (+0.1% m-o-m). The biggest monthly declines were in Oakville-Milton (-3.6% m-o-m), Vancouver Island (-2.3% m-o-m), Moncton (-1.9% m-o-m), Barrie (-1.5% m-o-m), and Toronto (-1.5% m-o-m). Prices dropped the least in Regina (-0.2% m-o-m), BC Lower Mainland (-0.4% m-o-m), Okanagan (-0.7% m-o-m), Saskatoon (-0.7% m-o-m), and Montreal (-0.8% m-o-m).

On a y-o-y basis, the most significant increases were in Moncton (+15% y-o-y), Victoria (+12%), Calgary (+11%), and Vancouver Island (+9% m-o-m), while they declined the most in Oakville-Milton (-9.7% y-o-y), Hamilton-Burlington (-6.2% y-o-y), Barrie (-4.5 % y-o-y), and Niagara (-3.7% y-o-y).

Compared to their recent peaks, prices have declined the most in Oakville-Milton (-20%), Hamilton-Burlington (-17%), Barrie (-16%), Guelph (-15%), and Niagara (-14%). Prices have corrected the least in Saskatoon (-1.2%), Regina  (-1.7%), and Moncton (-3.8%), while they haven’t peaked in Calgary.

In Alberta, benchmark prices rose 0.1% m-o-m and 10.7% y-o-y in Calgary, while they declined 1.4% m-o-m and 0.4% y-o-y in Edmonton. There is an important divergence between the performance in Edmonton and Calgary.

In Alberta, the housing market remains robust, with the level of transactions still above their pre-pandemic level. However, the number of transactions has eased in all regions compared to last year’s same month. (see table below for details). Compared to the average level of transactions in 2019, activity in the province increased by 33%, led by Calgary (46%), Central Alberta (+45%), Edmonton (+29%), and South Central Alberta (+21.2%). Activity is the weakest in Grande Prairie (-5%), Alberta West (-4%), and Medicine Hat (+1%).

New listings decline on the month at the provincial level. Compared to the average level of new listings in 2019, new supply in the province increased by 6%, led by Edmonton (+18%), and Calgary (+5%). New listings declined in all other regions compared to 2019, led by South Central Alberta (-27%), Alberta West (-17%), Grande Prairie (-12%) and Lloydminster (-11%).

With sales weaker than new listings, many regions have seen an easing of their housing markets. The primary seller’s markets are Calgary, South Central Alberta, Lethbridge, and Central Alberta. The main buyer’s markets are Lloydminster, Alberta West, Fort McMurray, Grande Prairie and Edmonton.

House prices performance has been mixed, but increased by 2.6% on a 3-month moving average of year-on-year in the province. The most significant increase are in Alberta West (10.1%), Lethbridge (+5.6%), Calgary (+4.3%), and Medicine Hat (+3.9%). On the flip side, Fort McMurray (-13.0%), Lloydminster (-3.1%) and Grande Prairie (-3.0%) saw declines in average house prices over the same period.

[1] 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.

Independent Opinion

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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