WHAT’S AFFORDABLE?
This summer we enjoyed a family celebration where a bunch of young adults were present. It was fabulous to re-connect, but surprising to listen to their conversations. Rather than concerts, parties, and travel, almost ALL of them were discussing where to live.
Today, we noticed an interesting video featuring Benjamin Tal, shown on BNN, https://www.bnnbloomberg.ca/video/rent-inflation-is-starting-to-rise-cibc-s-benjamin-tal~2463492. His theory is that rent inflation is likely to rise faster than home prices because:
- Builders can’t afford to build due to supply delays, inflationary costs of materials, and labour shortages
- Investors can’t afford to buy and hold rental properties due to their inflationary costs, rent controls, and of course rising interest rates
- There continues to be strong demand for rentals due to immigration and Gen Z/Millennials who need a place to live, but are priced out of many markets (even before interest rate hikes).
Mr. Tal has even heard stories of Builders cancelling projects or putting them on hold because they are not currently fiscally viable. That’s not good. Building new rental housing is a slow solution, but at least it’s a solution! Mr. Tal is also advocating for more purpose-built rentals, especially for young families. He also believes our culture needs to normalize renting as an acceptable lifestyle choice.
Enter the Calgary Market into this discussion. Okay, BNN Bloomberg wasn’t talking about us, but I will!
Canadians and immigrants are intelligent people. Historically they have figured out the affordability puzzle by moving, if there are jobs. Well, deep in today’s unemployment news, you will find that both Calgary and Edmonton now have unemployment rates of 4.9%. This is below the national average, and a slight decrease from last month. Mental note: lots of jobs here.
So is Calgary still affordable, or is it too late here too? Let’s look at renting first. If you average out all property types, rents went up 13% from 2020 to 2021 in Calgary. Then they went up an astonishing 18% from 2021 to 2022. According to Rentals.ca, that put 1 bedroom rents at an average of $1562/month. Compare that to Vancouver $2412/month, Toronto $2192/month, Victoria at $1803/month and Ottawa at $1692/month. The average 2 bedroom in Calgary for August was listed as $1925/month. Compare that to $3597/month in Vancouver!! $3115/month in Toronto, $2823 in Victoria, and $2118 in Ottawa. Bottom line is that Canadians can still find a 2 bedroom for under $2000 in Calgary, and less than that in many other parts of Alberta. Obviously there is so much more to the rental story, but mental note: with a similar income to other parts of the country, rental costs are very competitive here.
Affordability is touching every aspect of the economy from food, to energy, to recreation, etc…. Now add Provincial Sales Tax. No wait. Alberta doesn’t have provincial sales tax. So people who live here can save 5% to 8% on almost everything they need to buy. That puts a great dent in the affordability puzzle!
Is Calgary still affordable to buy houses? Well, our overall Benchmark price is now $532,000. This is up 7.4% from January 2022, and 11% from August of 2021. And yes, monthly payments are going up fast because of rising interest rates. But the benchmark price for all properties in Vancouver is $1,207,400! The seasonally adjusted benchmark price for Toronto is $1,130,463. And Ottawa saw an average home price of $633,444. Note to self: this winter, a new homebuyer should be able to find a house/semi-detached home/rowhouse or condo for under $500,000.
The market is showing a strong shift to affordability, both in where people live and the types of homes they are looking for. Wise investors will be shifting their paradigms too. Why? Because everyone needs somewhere to live. But many Canadians value “quality of life” together with the roof over their heads. Whether buying or renting, or investing, Calgary will have some fabulous choices throughout this winter. Connect with us anytime to learn more!
