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In the second quarter of this year, net migration in Alberta was 34,883. This is the highest level of net migration in Alberta, ever. At least since 1950, when we started tracking it.
The last peak net migration was 28,474 in the second quarter of 2013. In the second quarter of 2006, net migration was 24,935. In 10 months in 2006-07, housing prices doubled. You may remember that in the third and fourth quarters of 2006, prices started skyrocketing right through May of 2007.
Let’s peel the onion back on net migration and try to get perspective. The population of Alberta in 2006 was 3.4 million. In July of this year, it is estimated that there are 4.54 million of us in Alberta. That is one third more than in 2006. That means that the second quarter of this year had a higher ratio of population increase than the peak of 2006.In 2007, the five-year fixed mortgage rate was as high as 7.39 per cent. Today, many of us seem discouraged with a five per cent fixed rate. Maybe some perspective on rates can help us see a significant opportunity that lies before us.

At a recent open house I did, a family from British Columbia stopped in. They said they are moving permanently to Alberta. They said they had had issues accessing healthcare in B.C. and that Alberta has much better access.They also said the rents are about twice as high as in B.C. and home ownership is out of reach for many in the lower mainland. Worthy of note, we don’t have a lot of government-imposed rent controls like B.C. From this family’s perspective, homes in Alberta are a bargain.

Looking at mortgage rates and housing prices in isolation does not paint a complete picture. It is important to look at median household after-tax incomes in relation to housing costs.

Surprise, surprise, Alberta takes the win with a significant margin at $77,700 in 2020. That has a nice ring to it. Second place goes to Ontario, with a net median household after-tax income of $70,100.  Good luck getting into homeownership there. The third and fourth places are Saskatchewan with $67,700 and B.C. at $67,500.

The above is a snapshot of the potential future demand for housing. What about the supply? It is the relationship between supply and demand that will give us insight into where prices may be headed.Let’s look at the end-of-month inventory of homes for September over the last five years in the greater Edmonton region. September 2018 takes the win with 11,433 active listings and 1,424 sales for the month. The lowest level in the last five years was last year, with 9,139 active listings and 2030 sales. This year, we had 9,386 listings in September with 1694 sales.

I believe sales are down from last year because we still feel mortgage rates are too high. But are they compared to history?

I don’t think all the new Albertans plan to live in a van down by the river. They might want a real home to rent or buy. We are experiencing more demand for rentals this year. Typically, an increase in rental demand will precede an increase in demand for homeownership.

Now that you have more perspective on the housing market, net migration and mortgage rates, what might that mean for 2023 and beyond?One of my favourite games to play is a game I call “Play it to the End.” In economics, we are taught to collect data to predict human behaviour. Economists will attempt to construct a model to gain insight into the future. Once there is a reasonable prediction, I like to work backwards to identify advantageous action steps that I can take now to best prepare for that possible future.  If the models are mostly accurate, that can give hindsight in advance.

I see a possibility that home prices in Alberta could appreciate significantly in the very near future.

Some parents have purchased investment properties in Alberta to lock in housing affordability for their children.

I am seeing levels of diversification in Alberta that I have never seen before. It is expected that Alberta will lead the nation in economic growth for the foreseeable future.Canada is and has been significantly increasing national immigration. Before 2020, we would welcome around 260,000 new Canadians each year. This year we might welcome as many as 430,000 new Canadians, with that number expected to increase to 500,000 in 2025.

Where will they choose to live?  Maybe in the province with the most affordable housing, relative to after-tax incomes and the province with many employment opportunities. Alberta seems like a pretty good option on both those counts.

With a real possibility of increasing housing prices, what could you do to ride that wave or protect housing affordability for your children?

I think the best play is to buy and hold real estate in Alberta. We have a window of opportunity right now, even if it doesn’t feel like it.


Story by: Edmonton Journal