Varcoe: Prairies poised to outperform Canadian housing market in 2023

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Interest rates continue to rise and home prices in Canada continue to fall, but Alberta and the rest of the prairie are poised to outperform the nation as stormy market conditions continue to swirl in 2023.

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That’s according to a new housing report from TD Economics.

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Across Canada, average monthly home prices have fallen nearly 20 percent from their peak last year as several negative forces played out, including a string of rate hikes and a slowing economy.

During the same period, real estate prices in the Prairies fell by an average of six percent.

“Going forward, the same factors that helped support markets in the prairies over the past year are likely to persist,” TD economist Rishi Sondhi said in the report.

“This relatively resilient demand backdrop should also see price growth in the prairies outperform the rest of Canada.”

With the unpredictable factors rocking the country’s real estate market, any resilience is welcome.

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Last week, the Bank of Canada raised interest rates by another quarter point to 4.5 percent – the eighth hike since March – and higher borrowing costs weighed on consumers.

According to TD, the median selling price for a home in Canada is expected to fall 10.7 percent this year.

In Alberta, prices will fall 5.6 percent — averaging about $418,000 — with Saskatchewan posting a 6.9 percent drop and Manitoba a 7.8 percent drop. (Only Newfoundland and Labrador will do better.)

Larger markets, which have seen house prices skyrocket in recent years, are likely to remain under pressure.

Prices are expected to fall nearly 10 percent in British Columbia and 11.4 percent in Ontario.

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“Housing markets are holding up much better on the prairies than the rest of Canada,” Sondhi said in an interview.

The report predicts that total sales in Alberta will fall 20.9 percent annually this year – above the national decline – “but they have fallen from such an astronomically high level (in 2022) that Alberta sales levels are currently still is very high,” he added.

The Canadian Real Estate Association recently forecast that nationwide home prices will fall 5.9 percent to $662,000 this year, while overall sales will fall 0.5 percent.

The TD study and forecast released last week by the Calgary Real Estate Board (CREB) paints a picture of a slowing market in that province, but it’s not like hitting a speed bump at 75 mph.

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“I don’t expect significant declines anywhere based on what I’m seeing,” said Ann Marie-Lurie, chief economist at the Alberta Real Estate Association (AREA).

Alberta’s housing market has several factors weighing in its favor.

The province will lead the country in economic growth as commodity prices remain resilient, TD forecasts.

A tight housing market is also at play. The ratio of home sales to new listings in all three Prairie provinces is hovering around 60 percent, which the bank believes is close to “seller’s territory.”

Alberta has another helpful dynamic demand: a parade of floats coming in from other places.

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Between July and September, Alberta saw its largest net gain from interprovincial migration since 1980, when more than 19,000 people were added.

Calgary real estate agent Len T. Wong said the local market has slowed since the first half of 2022, but recent activity has been boosted by out-of-province buyers.

“Calgary’s market is stable and balanced, even this year,” Wong said. “We see a lot of migration here and we haven’t seen that for a long time.”

The affordability advantage also plays in Alberta’s favor.

In Toronto and Vancouver, benchmark home prices topped $1.1 million last year compared to $518,000 in Calgary last month.

“The buyers coming into our market are looking for affordability and looking for a better lifestyle,” said real estate agent Jared Chamberlain of Chamberlain Group/Real Broker. “The phone of people who are still considering moving here just won’t stop ringing.”

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Perry Alampay and his wife Mila are among the thousands of Ontario residents who have moved to Alberta in recent months, leaving Newmarket – where they had lived since the mid-1990s – to buy a home in Airdrie and settle down to put.

They moved to Alberta in November.

“We started looking for a house and my wife was thrilled. . . Ontario pricing just got ridiculous,” Alampay said Tuesday.

“For the value you get here, I’d say it’s worth moving here. And that’s why we’re convincing some of our family members who are still in Ontario to come and join us.”

Across the province, the median home price rose five percent last year to $447,500 while sales fell nearly two percent.

The strongest sales activity took place in Calgary, Red Deer, Grande Prairie and Edmonton, according to AREA.

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“I think we’re an outlier just because of our fundamentals. Higher commodity prices have generally improved our economy. I think the migration coming into the province is a big factor,” Lurie said.

“It’s a natural offset for some of the impact of higher interest rates.”

In 2024, TD expects Alberta home prices to rise 3.2 percent.

“Our forecast would expect some near-term weakness, but we expect the market to stabilize and move higher relatively quickly,” Sondhi added.

“We expect the market to bottom out sooner rather than later.”

Chris Varcoe is a columnist for the Calgary Herald.

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