Real Estate News

 

The Market Minute – February 17, 2022

In January, inflation in Alberta hit a 30 year high at 4.8%.

October 2007 was the last time inflation hit 5%

In 2007 Edmonton home prices rose by 30%

 

Source: Alberta Finance 2017https://bit.ly/3sKOiwx

Summary:

Alberta has experienced exceptionally strong growth in its housing market over the last couple of
years, with housing starts increasing at double digit rates in both 2005 (13%) and 2006 (20%).
So far in 2007, housing starts have kept pace with the record level of activity that occurred in
2006. Although all regions of the province have boomed, the timing has varied.
Below is a summary of how the housing boom worked its way through the province.
It Started in Fort McMurray…

With an unemployment rate reaching a low of 3.5% and investment in the oil sands topping
almost $10 billion in 2005, the number of people flooding to Fort McMurray for work rose by
over 50% in 2005.1

This put more pressure on the limited housing options available in the
region and resulted in a 70% increase in the number of housing starts in 2005. Housing starts
levelled off in 2006 due to a shortage of available serviced land, but have since jumped in 2007.
Average resale house prices jumped 33% in 2005, 13% in 2006 and have increased a further
23% thus far in 2007.

Vacancy rates have hovered around zero for the past three years, resulting in average rents for a
two-bedroom apartment increasing by over 35% since 2004.

Then Grande Prairie…..

Grande Prairie also felt the effects of a booming energy sector early on. A low unemployment
rate (3.2%), a low vacancy rate (0.2%) and a large influx of people boosted housing starts by
14% in 2005 and an additional 49% in 2006. House prices reflected this surge, increasing by
double digits in 2005 (15%), then 30% in 2006 and so far are up over 13% in 2007.
A CMHC regional study on Alberta noted that by the end of 2006, Grande Prairie had only one
suite for rent, resulting in the vacancy rate dropping to 0.1%. Consequently, rental rates for a
two bedroom unit in Grande Prairie were up 15% in April 2007 from October 2006, with Grande
Prairie obtaining a higher rent than a similar unit would in both Calgary and Edmonton ($1094
versus $1,037 and $877 respectively).

Calgary in 2006
Robust demand resulting from employment growth of 7.8% in 2006 and low housing inventory
created a severely tight housing market in Calgary. Construction of new houses shot up 25% in
2006 (after a poor weather related construction year in 2005), while the resale market saw a
flurry of activity and resulted in average resale prices increasing by almost 40%. The housing

1
This does not include temporary workers or any increase in the ‘shadow population’. It is Statistics Canada’s
estimate at migration into Wood Buffalo/Fort McMurray.
Economic Spotlight
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market was so tight that at least one seller conducted a house auction (something that is more
common in other parts of the world). Home owners cashed in on consumer desperation and in
most cases received well above asking price (on first offers) and no conditions placed on the sale
of the home. By December 2006, the market had started to moderate, with some sellers reducing
their asking price. The rental market felt the brunt of this active year as the vacancy rate
plummeted below 1%.

Edmonton Plays Catch-up ……
Edmonton’s housing market followed Calgary in 2006, with resale prices increasing 30% as the
surrounding area tried to accommodate the surge of migrants to the capital region. Although
employment figures did not show much growth in 2006, housing starts saw an increase of 13%
(following a 16% increase in 2005) and resale home activity picked up 18% in 2006. Rental
vacancy rates dropped over 3 percentage points to 1.2% in 2006 and contributed to a 10%
increase in rental rates for a two-bedroom apartment following two years of modest rent
increases.

Red Deer
With the advantage of being along the Edmonton-Calgary corridor and taking part in the
economic activity spawning from this connection, Red Deer has attracted more than double the
number of migrants in 2006 compared to 2004, posted on average just over 5% employment
growth over the past three years (4.4% in 2005, 4.6% in 2006 and 6.3% so far in 2007) and
continues to have a tight labour market with the unemployment rate currently hovering just
above 3%.
At a quick glance, it looks like the Red Deer housing market seems to have been chugging along
these last three years with strong stats posted in the resale market sales. New home starts began
to ramp up in 2006 increasing 13% and have posted equally strong figures so far this year. MLS
housing prices have followed suit with sharp price gains in 2007 (39%) on top of the already
strong figures posted in 2006 (29%).

Medicine Hat
Although Medicine Hat has experienced an increase of over 140% in migration levels since
2004, this is less than in most other centres. After seeing employment increase 6.5% in 2005,
job creation was minimal in 2006 and has actually declined so far in 2007. The labour market
continues to be tight with the unemployment rate averaging just under 4% so far in 2007.
Housing starts rebounded in 2006 (up 28%) after a 22% decline in 2005 and have increased
almost 5% this year. Activity on the resale market has been upward in direction, with its peak
performance of sales in 2005. Prices have steadily increased over the last few years and
continued into 2007 with a sales-to-inventory ratio of 67% (a sellers market).
Lethbridge
Little in the way of housing starts activity occurred in the Lethbridge area until 2007, with
housing starts now up almost 70%. All of the housing market activity occurred in the resale
market over the past three years (2004-2006), which has posted double digit sales growth in each
year. Although current sales in the resale market are currently down 10% so far in 2007, the two
likely factors contributing to this decline are increased interest in the new home market and the
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number of people waiting for their new home to be completed before listing their existing home.
MLS house prices have increased almost 40% in 2007. With a slowing resale market and
potential increase in inventory levels as the 70% increase in new home starts approach
completion, these price gains may be dampened in the ne