Soaring Canadian housing costs power a population boom in Alberta
NICOLE Kealy was something of a trendsetter. In January 2022 the mother of four sold her home in Chiliwack, British Columbia, to move across the Canadian Rockies to Calgary, Alberta, in search of more affordable housing.
With the profit her family made on their C$1.4 million (S$1.38 million) Chiliwack home–which had appreciated about 66 per cent in the roughly year and a half they owned it – Kealy and her husband were able to buy a C$550,000 house in Calgary, along with an apartment and a townhouse they rent out.
Between their new rental income and the savings on their own housing costs, the Kealys are living comfortably for the first time in years. They’ve even been able to splurge on home renovations and a vacation to the Dominican Republic. “In BC we had pretty good jobs, we made pretty good money, and yet we were still barely keeping up,” says Kealy, 43, who is a teacher. “Here we’re mortgage-free, and we have two rental properties.”
In the year or so following the Kealys’ move, tens of thousands of British Columbians and Ontarians have decamped to more affordable Alberta. The oil-rich province’s population surged 4.1 per cent in the 12 months through June, the fastest pace in Canada and a rate that puts developing countries to shame.
In absolute terms, most of Alberta’s new residents come from abroad, with international immigrants accounting for slightly more than 60 per cent of the population increase, according to Mark Parsons, chief economist at ATB Financial, a bank based in the provincial capital of Edmonton. But all of Canada is experiencing an immigration boom as Prime Minister Justin Trudeau increases targets for inflows from abroad to keep the population growing and the economy expanding.
What sets Alberta apart is interprovincial migration, which accounts for almost a third of the population increase, Parsons says. Of those new Albertans, nearly three-quarters come from Ontario and British Columbia.
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The main draw is Alberta’s relatively cheap housing. Real estate prices in Ontario and British Columbia soared during the Covid-19 pandemic, while Alberta stayed relatively flat. The benchmark home price in Calgary, the province’s largest city, was C$561,500 in October, less than half the C$1.21 million average in greater Vancouver and the C$1.13 million average in greater Toronto, according to the Canadian Real Estate Association.
The rate-hiking campaign started by the Bank of Canada in March 2022 has exacerbated the situation, raising the cost of financing home purchases significantly while leading to only small price decreases. Rates for conventional five-year mortgages have risen about 225 basis points since early 2022.
The influx is welcomed by the province’s business community, which sees it as insurance against the labour shortages that have been so common since the pandemic.
For provincial authorities, the infusion of new workers is a sign that decades-long efforts to diversify the economy away from the boom-and-bust energy industry are finally paying off. Alberta’s previous population surges were driven largely by major expansions of oil and gas projects, but the industry has played only a minor role in the current one. This time the standouts are technology–including fintech, agricultural tech and cleantech–as well as energy-adjacent sectors such as hydrogen and biofuels.
An increase in remote work also may be contributing to the population surge, though data on the phenomenon is spotty, Parsons says. The most recent figures, from late 2021, show about 100,000 Canadians working for an employer outside of their home province, he says.
“We suspect remote work is playing a role,” Parson says. “If it’s an affordability story, then you would think that more remote workers are choosing Alberta.”
Notable wins in recent years include Royal Bank of Canada’s 300-person Innovation Hub, which opened in late 2021, and Indian IT colossus Infosys’ announcement about a year ago that it would double the size of its Calgary office to 1,000 workers.
“There’s critical mass,” says Deborah Yedlin, chief executive officer of the Calgary Chamber of Commerce. “People are realising that there’s an ecosystem here to support the diversification of the economy.”
But the tide of new arrivals has its downsides. The influx is crowding classrooms and further straining an already stretched health-care system. It’s also driving up home prices in Calgary.
The federal and provincial governments have pushed more responsibility for housing, mental health and addiction treatment down to the city level for decades, without a corresponding increase in funding, says Calgary Mayor Jyoti Gondek. “If we don’t keep pace with housing and we don’t keep pace with getting the proper funding and financing models with the other two orders of government to support things like public education and public health, we’re not going to be able to take care of the folks that are coming here,” says Gondek, who took office in October 2021.
On the housing front, the city has a programme to encourage converting unused office space into residences. So far, Calgary has invested C$153 million into 13 approved projects and has four more in the pipeline, Gondek says, which will net 2,300 additional units of housing.
Until more supply is built, the local housing market is likely to remain in a frenzy, says Cindy Bauer, who has been a realtor in Calgary for almost two decades. She says that most properties receive multiple offers for well over the asking price, and buyers face pressure to waive inspection and financing conditions.
Out-of-province buyers now account for about 15 per cent of Bauer’s work, up from 5 per cent in prior years, with some purchasing homes sight unseen. That increased competition–especially from cash-flush buyers from BC and Ontario–has younger Calgarians feeling like they’ll never be able to buy, she says.
With the Bank of Canada expected to begin cutting rates next year, prices may only rise further, creating an even more “exhausting” situation, Bauer says.
“You go in, you compete with 12 people, and only one wins–that means 11 people walk away devastated,” she says. “And then the next house that comes on, we all rush and go do the same thing.” BLOOMBERG
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