Calgary Real Estate Blog

Alright, maybe not ever, but it’s pretty good; from Monday’s Financial Post: “Prices remain stable, perhaps maddeningly so for the legions of bubble mongers,” said Douglas Porter, chief economist at BMO Capital Markets.

Yes, thanks to some new data from the Canadian Real Estate Association, there seems to be a turn in public opinion as to whether or not Canada’s in the midst of a housing bubble. More rational discourse has replaced the nearly-apocalyptic cries of some who still expected our country’s real estate market to follow the United States’ lead into a precipitous plunge.

Instead, we’re seeing healthier-than-expected growth, not just in Alberta, but nationwide. With a new Bank of Canada governor being installed, there’s the possibility of some minor policy shifts from the rockstar tenure (at least by banking standards) of outgoing governor Mark Carney, but I doubt any drastic moves will be made. They just don’t need to be. Household debt is a perennial problem, sure, but it’s not aggravated by an appetite for increasingly expensive homes; by and large, Canadians don’t especially care for being house poor.

I’m certain Alberta will continue to lead the country in home sales and rising property values, as we stand to be Canada’s turbocharged economic engine for some time to come, but it’s nice to see the rising tide lifting all of the ships, to mix some metaphors (unless the turbocharged engine was on a speedboat… Yeah, that’s it!).

It’s from a few months ago, but I thought it still worth drawing readers’ attention to: here’s an article from January’s Financial Post positing that so-called stubborn sellers are preventing a burst real estate bubble in Canada. It’s a good read.

Now this doesn’t really speak specifically to Calgary’s situation – we continue to set sales and price records, and I continue to work my butt off – but it does say something about the market’s health nationally. Sales are down in much of the country, yet prices aren’t really dropping. Without finding themselves suddenly underwater like so many unfortunate souls in the U.S., Canadians aren’t motivated to drop their selling price to move their properties quickly, and that means the market as a whole is remaining pretty stable. Barring a massive wave of unemployment or interest rates jumping up several points overnight, the spectre of a bursting real estate bubble in this country is, in my opinion, wildly overhyped.

Just one man’s opinion, of course, but it’s hard to see the future as dire when I so rarely get a day (or night) off.

At the end of January, RE/MAX released their Canadian Homebuying Trends Survey 2013-2014, and among other interesting facts outlined in the results it showed one-in-five homebuyers in Alberta to be single, with 40 percent of those in the market between 18-34 years of age (more than in any other province). Yet another sign of Alberta’s stable, growing housing market, and confirmation that this province is a great place to live for the young and ambitious. Unlike some provinces where the confluence of skyrocketing house prices, relatively low wages, and a hefty tax burden make renting the only option early in one’s adult life, in Alberta we’re blessed with opportunity.

Also noteworthy from the survey is the finding that nearly a third of Albertans intending to buy property this year plan to have at least a 30 percent down payment. Low interest rates won’t last forever (although recent predictions suggest they’ll last for a while yet), and so I’ve always felt it’s wise to pay as much principal as possible to keep mortgage payments low even when rates fluctuate (not to mention saving significant money long-term). I’m pleased to see that message being received across the province.

Despite the attention-grabbing headline – “Calgary housing market ‘seriously unaffordable’ – the Calgary Herald’s story from a couple days ago on the latest Demographia International Housing Affordability Survey (DIHAS) isn’t dire news. For nine years running, this survey has measured something called the median multiple across more than 300 cities around the world, and ranks them for affordability. The median multiple is calculated by dividing median house prices in the area by residents’ median before-tax income, and this year Calgary’s median multiple was 4.3, which the organization calls ‘seriously unaffordable’.

Interestingly, the article goes on to cite an RBC Economics Research study showing the Calgary market hit its most affordable levels in years in Q3 2012, the same quarter the DIHAS looked at.

So what’s going on here? If Calgary’s market is so unaffordable, why are sales already up more than ten percent, year-over-year (and why am I so rarely at home watching TV with my wife in the evenings)? Calgary’s luxury market had a record year in 2012, with 544 homes selling for more than $1 million; that beats 2007’s record high by nearly 100 sales, and would skew the median multiple at least a bit. So, perhaps there’s a flaw in the methods used to compile the DIHAS, and perhaps ‘the Alberta Advantage’ makes us a fairly unique case. Taxes in the province are extremely low (some would say too low), and that means the difference between pre-tax and post-tax income for Calgarians is not the same as in, say, Vancouver. Combine that with continued bargain basement interest rates, and we’ve still got a pretty attractive environment in which families can find a place to make their own. Are houses here more expensive here than they used to be? Sure they are. To deem them ‘seriously unaffordable’, given all the angles and not just median income, though, seems like a stretch.

The Calgary Real Estate Board (CREB) released its annual forecast for 2013 today, predicting a market that continues to grow but at a slower pace than 2012’s levels. Taking into account employment trends and constraints on the oil sector, CREB suggests we can expect sales in Calgary to grow 2.2 percent this year, with house prices going up nearly three percent.

In their 2012 forecast, CREB predicted a 12 percent sales increase, with prices going up two percent; we ended up with a nearly 19 percent sales jump and a 2.3 percent rise in prices.

Splashed across the cover of this week’s Maclean’s magazine is the rather sensational and alarmist headline, “Inside the Great Real Estate Crash of 2013,” highlighting a piece on what may or may not be a Canada-wide bubble in the housing market. The gist is that sales are down across every major city in the country – everywhere, that is, except Calgary, where properties are moving at a healthy pace. This little tidbit isn’t mentioned in the article proper – doesn’t fit into the overarching narrative – but is noted as part of a chart indicating national trends, where our fine city receives the only green ‘up arrow’ in a sea of red downers.

While condo buyers in Vancouver and Toronto are rightfully concerned that a sudden glut of properties combined with a potential economic downturn could lead to rough waters ahead, there is little indication that Calgarians face the same risks.