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

Bottom line

National house prices increased for the first time in a year in March. Since the start of the correction, prices nationally have fallen by 15.5%. However, the correction has been more significant in some markets, especially those with the most significant post-pandemic gains. However, the continued decline in new listings, to their lowest level since 2004, may have some important impact on the housing market. The continued decline in inventories is likely to constrain activity and provide some support for house prices, despite the cooling impact of higher interest rates.

In Alberta, housing market activity eased further in March but remained robust by historical standards. We note a continued divergence between the metropolitan areas. Prices in Calgary have been very stable over the past year and the city remains one of the strongest cities in Canada, supported by low inventories and the weakest new listings since 2002. On the flip side, the price correction continued in Edmonton, as inventories are higher. With less froth accumulated during the pandemic, Alberta’s market is less prone to a sharp correction than other regions, notably Ontario. In addition, strong migration to Alberta also supports 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 last year points to further weakness this year. As we have shown recently (see), further significant declines in house prices, especially in Toronto, Vancouver, Montreal and Ottawa, will be required to restore affordability. However, the continued lack of supply in many regions and increased immigration could provide some support to house prices and prevent further correction.

 Activity in the Canadian housing market increased by 1.4% m-o-m seasonally-adjusted in March. The number of transactions, at 33.8k, is almost 20% lower than on average in 2019 and 35% 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 was generally higher in BC, Ontario, Quebec and Manitoba, while it declined in Nova Scotia, Newfoundland, Saskatchewan and Alberta. In Alberta, the number of transactions declined (-1.1% m-o-m) in March, but activity was almost 20% higher than in 2019.

There continue to be some divergences between provincial markets. Compared to the average level of 2019, the number of transactions is well above its pre-pandemic level in Alberta (+18%), Saskatchewan (+17%), and Newfoundland (+33%). On the flip side, activity is well below in Ontario (-28%), Nova Scotia (-27%), Quebec (-26%), and BC (-17%).

New listings dropped by 5.8% m-o-m seasonally-adjusted in March, to their lowest level since 2004. The decline was broad-based with the biggest drops in new listings in Alberta (-10.0% m-o-m), BC (-8.7% m-o-m), and Ontario (-6.4% m-o-m).

With sales activity stronger than new listings in most regions, the month-of-supply measure[1] inched lower to 3.9 nationally, about 2.2 months higher than its recent low. Based on this measure, most provinces have seen a decline in inventories in March and level 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 PEI (+4.7 months), Quebec (+3.5 months), BC (+2.9 months), and Nova Scotia (+2.5 months). It has increased the least in Newfoundland (+0.4 months), Saskatchewan (+1.3 months), New Brunswick (+1.6 months), and Alberta (+1.7 months). With a month-of-supply at 3.8, Alberta’s housing market remains much tighter than before the pandemic (7.0 months on average in 2019).

With a rebound in sales and a moderation in inventories, the MLS House Price Index rose by 0.2% m-o-m, its first increase in a year. Compared to last year, house prices eased nationally by 15.4% y-o-y. Despite the increase nationally, most areas saw a decrease in prices on the month. The biggest monthly declines were in Regina (-2.1% m-o-m), Victoria (-1.7% m-o-m), Guelph (-1.3% m-o-m), Okanagan (-0.8% m-o-m), and Vancouver Island (-0.7% m-o-m). Prices increased the most in Oakville-Milton (+2.2% m-o-m), Greater Toronto (+1.6% m-o-m), and Niagara (+0.4% m-o-m).

On a y-o-y basis, the most significant declines were in Niagara (-22.1% y-o-y), Hamilton-Burlington (-21.4% y-o-y), Barrie (-21.4% y-o-y), and Guelph (-19.9% y-o-y).

Compared to their recent peaks, prices have declined by 15.5% nationally. However, prices are still almost 30% higher than they were in January 2020 at the eve of the pandemic.  Compared to their recent peak, prices dropped the most in Hamilton-Burlington (-22.6%), Niagara (-22.3%), Barrie (-22.0%), and Guelph (-21.6%). Prices have corrected the least in Regina (-4.9%), Moncton (-6.5%), Montreal (-7.9%), Winnipeg (-8.7%) and Edmonton (-8.7%), while Calgary (-0.4%) and Saskatoon (-0.6%) have only seen a marginal decline in prices.

In Alberta, benchmark prices eased 0.2% m-o-m and are up 0.8% y-o-y in Calgary and decreased 0.2% m-o-m and -7.8% y-o-y in Edmonton. There continues to be a divergence between the performance in Edmonton and Calgary, likely resulting from higher inventories in Edmonton.

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 18%, led by South Central Alberta (+33%), Calgary (+32%), Central Alberta (+30%), Edmonton (+11%), and Lloydminster (+9%). Activity was weaker compared to 2019 in Fort McMurray (-19%), Grande Prairie (-16%), and Alberta West (-11%).

New listings declined on the month at the provincial level. Compared to the average level of new listings in 2019, new supply in the province decreased by 17.8% and was lower in all regions, except for Fort Mc Murray (+18%). New listings declined the most compared to 2019 in South Central Alberta (-43%), Alberta West (-35%), Lethbridge (-28%), and Medicine Hat (-27%)

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

Average house prices declined by 6.9% on a 3-month moving average of year-on-year in the province, with lower prices in almost all regions. Average prices were flat in Lethbridge (+0.1%) and declined the least in Medicine Hat (-0.4%), Grande Prairie (-2.5%), and Calgary (-3.5%). The biggest house price declines were in Lloydminster (-11.0%), Fort McMurray (-10.3%), Edmonton (-9.8%), and Alberta West (-8.7%).

[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.