Want To Keep More Of Your Money In Your Pocket? Think Calgary
Calgary is one of the hottest topics in the news and headlines lately in terms of the Canadian real estate market, resource industries and the economy on whole. Mario Toneguzzi, Senior Report and Columnist for the Calgary herald, reached out to REIN’s Director of Research Melanie Reuter with this question:
“CREA stats were out this morning. They show Calgary had the best year over year growth in sales of all the major markets and its benchmark price was also the best. Can you shed some light on why Calgary is continuing to be the bright light in the Canadian real estate market?”
Here is what Melanie had to say:
The graph below shows exactly what is happening in the real estate market in Calgary; it is merely following the jobs. The creation of jobs in the oil and gas industry (the unemployment rate of Alberta was 4.4% in April) is bringing people into the province and into the city. Further, once again as we saw in 2006, foreign workers are filling entry level and service industry positions (such as fast food jobs). Migrants into the province, especially people from out of country tend to rent for longer periods of time before buying (if at all). This is even more apparent when migrants come from developing countries, as temporary workers or on unskilled labour visas.
The influx of people puts pressure on housing, driving down vacancies which increases rents. The high rents often lead many renters to take the plunge into home ownership, diminishing the supply of homes. More demand and less supply means sellers can command higher prices. Residents can afford the higher home prices because wages continue to go up due to the competition for employees. Average weekly earnings in Alberta are the highest in the country. Yet, when you look at affordability, Alberta homes are reasonably priced compared to other provinces and cities. Although they may not feel cheap for longtime residents, high household incomes facilitate ease in carrying home ownership costs.
In fact, homes in Calgary are currently more affordable now than compared to the 27-year average according to RBC. A standard two-storey home requires 38.9 percent of an average pre-tax income; yet, the 27-year average notes that 39.6 percent of an average income was needed. The condominium market is slightly below the average as well requiring 22.2% of an average income. Compare this to other cities: purchasers of condos in Vancouver need to use 41.8 percent of their pre-tax income and in Toronto 33.1 percent is needed. However, average weekly earnings are not as high as they are in Alberta!
The message is being heard loud and clear: Come to Alberta, there is lots of work, you will make and keep more money (with no provincial sales tax, land transfer tax, fees for provincial medical).
Barring some unforeseen circumstance that negatively impacts the provincial economy, we feel that real estate in Calgary will continue to do well.
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