Calgary has reclaimed its title as the strongest major housing market in the country after correcting several years ago, says a new report released Thursday by BMO Economics.
The report, Canadian Housing Update: Tale of Four Cities, examined the state of the housing markets in Canada’s four largest cities: Vancouver, Calgary, Toronto and Montreal.
Sal Guatieri, senior economist with BMO Capital Markets, said listings are lean in the city, giving sellers the upper hand right now on prices.
“Three main factors. Strong economy. Strong population growth. And good affordability. Those are all driving Calgary’s housing market now and likely in the future,” said Guatieri.
“We don’t see bad things happening to Calgary’s economy any time soon, barring a big drop in oil prices for example. And we think Alberta for one will definitely lead economic growth perhaps for the next couple of years riding the energy boom. As a result, Canadians from across the country will likely continue to migrate to Alberta and Calgary looking for work. That can always support the housing market.”
According to the Calgary Real Estate Board, year-to-date up to Wednesday, there have been 22,489 MLS sales in the city, up 10.85 per cent from a year ago. New listings of 31,366 are up by 0.75 per cent but active listings of 3,034 are down 19.27 per cent. So far this year, the median selling price of $400,000 has increased by 5.26 per cent while the average sale price of $456,680 has risen by 6.60 per cent.
“Calgary’s resale housing market has been strong this year,” said Ben Brunnen, an economic consultant in the city. “A lot of people are moving to our city and finding that rents are high but the economy is good. Under these conditions, homeownership makes sense.
“Unlike the last housing market expansion a lot of current homeowners are staying put, which keeps inventories low. Strong confidence in Alberta’s economic prospects and the threat of higher housing costs in the future could also be pushing more people into the market.”
The BMO report said new home construction has picked up but housing starts have barely kept pace with an exploding population.
“Inventories of new homes are very low, while benchmark prices are climbing the fastest among major cities and have now all but retraced the 16 per cent collapse from 2007 to 2009, said BMO.
Guatieri said that despite “heady price gains” they remain reasonable at about four times the median family income and mortgage costs “consuming a manageable” 23 per cent of earnings.
“About half of the increase in prices is supported by rising income. Hourly wages in Alberta are up 4.4 per cent year over year in the first 10 months of the year, double the national rate,” he said.
BMO said immigrants and young Canadians are flocking to the city, drawn by better job prospects, faster wage growth, and healthier housing affordability than in Vancouver and Toronto.
“Strong economic and population growth will encourage an upward trend in Calgary’s house prices, though higher borrowing costs will moderate the gains,” added Guatieri.
The report listed Calgary’s median family income at $100,500. The other three cities surveyed had median family incomes of $72,400 in Toronto, $72,800 in Vancouver and $73,200 in Montreal.
The ratio of house prices to annual family income in Calgary was 4.1. It was also 4.1 in Montreal, 6.6 in Toronto and 8.3 in Vancouver.
The mortgage service costs as a percentage of family income were: 23.1 in Calgary, 39.3 in Toronto, 50.2 in Vancouver and 23.1 in Montreal.