Madelyne Toller relaxes in the living room in her home in Edmonton on Aug. 31. After four months of looking, Ms. Toller successfully moved to purchase the 1972 bungalow in the Duggan neighbourhood in the city's south side.Kelsey McMillan/The Globe and Mail
Alberta may be calling, but despite the many similarities between the province’s largest cities, when it comes to house prices, Edmonton is lagging behind – why?
Last winter, Madelyne Toller began her search for a home in Edmonton. “We looked at a lot of places,” she says, noting that having a backyard was the main reason she wanted to enter the detached market. “I was living in a condo with my high-energy dog, and really needed more space for him.”
It took Ms. Toller four months and one failed bid before she successfully moved on a 1972 bungalow in Duggan, a mature neighbourhood in south Edmonton, that suited most of her needs while not overstretching her budget. The listed price of the 1,315-square-foot house was $415,000.
“I didn’t know anything about this neighbourhood,” Ms. Toller says. “It is a little bit further from downtown than I would have liked, [but] in terms of safety and convenience it was a good compromise.”
Thanks to the help of her realtor, Hillary Rilling, Ms. Toller’s experience as a first-time buyer was straightforward, but not stress-free. “It was like a second full-time job,” she says. “There were multiple houses that I loved, [but] they had an offer on them before we could arrange a viewing.”
Had Ms. Toller been looking for a home in Calgary, however, it would have been even more difficult to find a unit of similar characteristics at the same price point. In April, the average price in Edmonton’s detached segment was roughly 30 per cent lower than Calgary’s, as average prices in this segment reached $493,000 and $690,000 respectively. And the spring season was just beginning.
In August, the average resale price of detached homes in Calgary surpassed $700,000 – while in Edmonton it decreased to $492,000.
Unlike Calgary, the real estate market in Edmonton hasn’t experienced any major fluctuations this year, says Melanie Boles, board chair at the Realtors Association of Edmonton. “Our average price is still sitting in that very affordable $412,000 range,” she says, pointing at data from the last week of August. “That still is very affordable for the average person.”
Over the past two decades, house prices have tended to be lower in Edmonton, and price fluctuations ran mostly in parallel. But that changed in 2022, when the house price index took off in Calgary. By July this year, Calgary’s HPI was 23.59 points higher than Edmonton’s – a record gap.
This situation is keeping many first-time buyers in Calgary from homeownership and creating a glut in the city’s rental market.
Robert King is a Calgary renter who’s been saving up to buy a house for two years, but despite having a relatively high income and a stable job as a tradesman, his dream of homeownership is becoming increasingly elusive. “We’re making our way there,” he says. “But every time my savings account goes up – housing prices also go up.”
The reason house prices in Calgary have reached a record high this year, while in Edmonton they’ve remained stable, seems to be a matter of supply and demand.
Driven by interprovincial and international migration, in 2022 Alberta’s population increased by roughly 119,000 people, and according to City of Calgary estimations, nearly a third of these new arrivals settled in Calgary.
Despite similar employment numbers, a key difference between the two cities is their economy, says David Dale-Johnson, the Stan Melton executive professor of real estate at the University of Alberta. Because Edmonton’s economy is driven by government, health care, postsecondary, wholesale retail and “grey collar” oil and gas, it allows for more stable housing market conditions than Calgary. “From an entrepreneurial, new high-tech growth, Calgary is the place to be, relative to Edmonton,” he says.
Indeed, according to Ray Wong, vice-president of data operations at Altus Group, Calgary has quickly become a magnet for talent in the tech and energy sectors. “When firms are looking at different cities to locate to, they look at the overall occupancy costs, at the cost of living and at the talent pool,” he says. “Both cities are doing well based on affordability, but Calgary a little bit more so because of the types of jobs available.”
But this doesn’t mean Edmonton’s population isn’t growing. Between July, 2021, and July, 2022, Edmonton’s population increased at a rate of 2.4 per cent, while Calgary grew by 3.1 per cent.
Some believe that the main reason these markets are behaving differently is that Edmonton was better positioned to accommodate newcomers.
“What happened in Edmonton is that they never had the same supply shortages Calgary did,” says Ann-Marie Lurie, chief economist at the Alberta Real Estate Association, noting that by the end of 2022, Edmonton had five months of supply, while Calgary had less than two months.
“Everyone went through this big peak last year, when the market ran up,” she says. “Edmonton came back down [this year], like Calgary did, too. But Calgary ramped back up, and Edmonton didn’t – and part of that was because they have more supply.”
One of the factors that have helped accommodate rapid population growth in Edmonton is a more robust stock of purpose-built rentals, Ms. Lurie says, noting that this has allowed Alberta’s capital city to divert some growth away from the resale market.
As the fall market settles in, Edmonton buyers still have more choices available across segments and price points. On Sept. 1, the share of detached homes listed for $500,000 or less in Edmonton represented about 50 per cent of all listings in this segment, according to Realtor.ca. In Calgary, this share was less than 9 per cent.
But if current migration trends hold, and housing starts don’t pick up, Alberta’s capital city could follow Calgary’s lead, Ms. Lurie says. While supply across segments has remained higher than last year, interest rates are cooling demand in the upper end of the market. As a result, housing starts in Edmonton dropped by roughly 40 per cent in the second quarter of 2023, relative to the same quarter last year. If this situation persists, Ms. Lurie says, it could limit supply and trigger price growth in the resale market.
Although a tighter market in Edmonton could price out first-time buyers, the pull of Alberta’s cities is likely to continue. “The migration patterns have been mostly from Ontario, and they’re less price-sensitive than people in Edmonton,” Ms. Lurie says.
“If you’re coming from some of the larger centres around Toronto, or near that area, you’re not going to be as concerned about [paying] $700,000 for a detached home.”