Calgary's Housing Market: What's Behind the Skyrocketing Prices?
Calgary Real Estate and Rental Market Update
April 1, 2023 - Written by Jamie Palmer, President/Broker of Power Properties
At the time of writing, the average price of a detached home in Calgary is $708,095! Prices are up 6% compared to March 2022, which itself was 12% higher than March 2021! On top of that, It is anticipated that prices will continue to increase this year! Everyone wants to know what is causing these increases, how long are they likely to last, and is now a good time to buy rental properties?
Immigration and Affordability Fuel Housing Demand in Calgary
The primary driver of price increases is demand fuelled by increasing immigration and population growth in Alberta. Alberta’s population grew by over 60,000 people in 2022. All of these people need somewhere to live and unfortunately (or fortunately depending on if you are a landlord), Alberta has the lowest housing per capita ratio in Canada… Alberta would need to build 138,000 housing units just to be average in Canada, assuming no further population growth, and for perspective, Alberta only had 35,000 housing starts in 2022. So there is a severe imbalance between housing demand and supply, one that is effectively baked in for several years to come, as we can’t build homes fast enough to meet growth.
Much of what is driving immigration to Calgary is the difference in affordability between major cities in Canada, Vancouver and Toronto’s average price for detached homes is still well over a million dollars, and the average household income is lower in both cities compared to Calgary, making Calgary a perceived bargain. So while most Calgarians are gobsmacked at the notion that an average house is $708,000, Torontonians and Vancouverites look and think “what a deal”! There is a similar difference in rents as well, with the average two-bedroom apartment in Toronto costing $3200/month, a number that can get you a nice suburban house in Calgary.
Calgary's Booming Industries Set to Drive Continued Growth for Years to Come
So the next question is how long will this last? By all indications, Calgary can expect continued increases for the next several years to come. While we are unlikely to see sky-high oil prices due to expectations of a looming worldwide recession, Alberta has numerous other industries that are set to boom including both green and blue hydrogen production, and lithium production. Alberta may have five times more lithium than the rest of Canada, and likely more than all of North America, and it’s relatively easy to extract. So in a world looking for politically safe, environmentally responsible energy and mineral supplies, Alberta is exceptionally well positioned. This is creating well-paying jobs, which in turn is continuing to attract workers from across Canada and around the world.
Real Estate Market Trends Suggest Now is the Time to Invest
With the above in mind and as my father always told me, the best time to buy real estate was twenty years ago, the second best time is now… With both values and rents expected to continue to increase over the next several years, now is certainly a good time to purchase properties. Having said that, it is important to understand that rents lag sales prices by six months to a year, so it is very difficult to purchase a property and have it produce positive cash flow in the first year. It takes time for the rent to catch up to the sale price so to speak, and this should be budgeted for when you consider purchasing another property.