The province saw a bumper 2023 – and there’s little sign of a slowdown in activity
As affordability challenges worsened across many Canadian housing markets in 2023, scores of homebuyers began to turn their attention to Alberta – and the province’s high standard of living and more reasonable prices could point to another busy year in store in 2024.
While the benchmark price in Alberta’s priciest city, Calgary, jumped by 11% in November on a year-over-year basis, at $572,700 that figure sat well below the average in other major Canadian markets such as Toronto and Vancouver, where prices routinely jump above $1 million.
A persistent lack of supply in the Alberta market, coupled with high homebuying demand, are likely to see activity continue at an elevated level in the province this year, according to Red Deer-based broker Pamela Pikkert (pictured top) of The Place to Mortgage.
She told Canadian Mortgage Professional that even during the latter weeks of December, typically a quiet spell in mortgage markets across the country, she’d fielded plenty of calls from current and prospective clients.
“I think that the year ahead is going to be very, very busy,” Pikkert said. “I think there is a very large pent-up desire for homeownership that’s being driven just by the lack of properties that have come on the market.
“Speaking specifically to Alberta, I know properties that get listed and really they’re under contract within a few days. So it almost doesn’t matter what you’re selling.”
Pikkert also pointed to the federal government’s immigration targets for the coming years as a factor that’s likely to keep Alberta’s housing and mortgage markets ticking along. The province, according to TD, “continues to draw strength from the fastest population growth in the country.”
With no clear timeline for rate cuts, market activity may remain subdued in the first few months of the year, according to Matthew O’Neil, President of Connolly Capital Mortgage Solutions.https://t.co/wsZ3tLbs1f#mortgageindustry #housingmarket #homesales #interestrates
— Canadian Mortgage Professional Magazine (@CMPmagazine) January 16, 2024
What are the prospects for first-time buyers in the Alberta housing market?
In sharp contrast to more expensive markets, prospects for first-time homebuyers remain strong in Alberta, Pikkert said, even if rising home prices mean the number of borrowers having to co-sign for a property has ticked up slightly.
Learn what is a co-signer on a mortgage in this guide.
“I’m seeing more borrowers being required to be added to the file, so we’re using all of our abilities to bring in every piece of income that we can for a borrower,” she said.
“The child tax credit, the first-time homebuyer grant – we’re using all the pieces we can to get them into the market. But first-time homebuyers are still there, they’re strong, and they’re still buying homes.”
The federal government’s first-time homebuyer incentive, which offered new buyers assistance funding a downpayment through a shared equity program, has proven virtually unusable in red-hot markets because it only provides a loan of up to 10% the downpayment amount for a newly constructed home, and 5% for a resale or existing home.
That’s normally not sufficient to substantially reduce affordability hurdles – but Pikkert said the program hasn’t proven successful among her clients either, with the shared equity component usually the sticking point.
“I know I offer it to a lot of my prospective buyers, but there’s still a hesitation on their part,” she said. “They feel they don’t want the government to have a second mortgage on their property – so I’m going to say maybe only 5% of my buyers [use it].”
When could price growth become a problem for Alberta?
Could continuing home price appreciation in Alberta see affordability eventually creep out of reach for new buyers? Royal LePage’s 2024 market report expects Calgary prices to rise by a further 8% by the end of this year, although price growth elsewhere in the province isn’t expected to be as striking.
Pikkert said consistent price growth and interest from elsewhere in the Alberta real estate market could ultimately prove a cause for concern, “because then the only way to get those houses would be to offer over value.”
Indeed, many offers over the listed value, she added, have come in recent times from out-of-province buyers who may be used to bidding wars and properties selling for many times over their original listed price, trends which aren’t typically factors in Alberta’s housing market.
On the other hand, with some speculation that 2024 could be more favourable to Canadians hoping to refinance because of the potential that interest rates will fall this year, Pikkert said Albertans could find themselves in a good position to do so.
“We’re finding ourselves in a position where the equity, because values have gone up a bit, might be there for people to look at refinancing,” she said. “I think we’ll see an increase in people doing a refinance to make improvements to their primary residence [who aren’t able] to find something else.”
