Opinion: Edmonton’s real estate market the latest sign Ottawa should get serious about house-price inflation

The average single-family home in the greater Edmonton area costs $493,543 as of February.The Globe and Mail

The year is shaping up to be a busy one for real estate transactions in Edmonton, with a near 11-per-cent jump in the average price of a single-family home between January and February, alone.

This kind of monthly percentage increase might not make people living in other parts of the country bat an eye. But it’s a big deal in Alberta – a land of relative affordability when it comes to Canadian housing.

The average single-family home in the greater Edmonton area costs $493,543 as of February, the highest price the real estate board has on record. But that’s still a steal compared with buying in Vancouver, Toronto, or Guelph or Chilliwack. Prices in Alberta’s capital still match up with many people’s salaries, their ability to assemble a reasonable down payment and to secure a mortgage.

One month of ballooning house prices doesn’t make a year-long trend. But this year’s already sharp increases in Edmonton, one of the last big Canadian cities where the average price of a detached home is under half a million dollars, is a sign the issue of Canadian housing affordability hasn’t been addressed in a meaningful way. Runaway increases in Canadian home prices remain a political liability for the Liberals.

And right now in Alberta, there are increasing signs deal-hungry investors, flush from cashing out in higher-priced markets in other parts of the country, are coming to buy.

Calgary prices are already higher than Edmonton’s, but were up another 6.5 per cent for detached homes just between January and February. The Calgary Real Estate Board said, anecdotally, it’s hearing of many investors from other parts of Canada buying property in the city this year. And Tom Shearer, the former chair of the Realtors Association of Edmonton, said the sharp rise of prices in his city so far in 2022 is directly related to “the liberation of equity from other properties in Canada.”

Even with the increase in prices, “it’s still very affordable compared with almost anywhere other than Saskatchewan and Manitoba,” Mr. Shearer said. “People are seeing that we’re at the beginning of our cycle, whereas maybe some other regions are at the end of their cycle.”

Certainly, this is good and bad news for Alberta. Less than two years ago, homeowners in the province wondered whether prices would ever substantially increase here, and many would have welcomed investors.

But then came low, low interest rates to keep the economy from toppling, and work-from-home demand for bigger, better properties. Those low interest rates also spurred real estate investors. And in 2022, Albertans might actually have to worry about prices going too high – a problem the province really hasn’t had since the boom years of 2006 and 2007.

Investment dollars aren’t solely responsibly for the situation, of course. As of this year, some new buyers are scrambling to get into the market before further interest rate hikes. Supply is an issue. Immigration levels are increasing. And relative affordability, and increasing economic activity in Alberta, are factors adding to the ranks of those who will want to live and work in the province. (And it’s not like Albertans aren’t used to some volatility. If you’re not worried about the up-and-down nature of real estate, linked to global oil and gas pricing, you haven’t been around long enough.)

But still, by this point, there should be much more substance to the Liberal plans to cool “excess price growth” across the country. A promise originally made in the 2019 election campaign, to introduce legislation to add a 1-per-cent vacant-home tax for foreign owners on housing, is only now making its way through the House of Commons. In the 2021 election campaign, the Liberals promised a temporary ban on purchases by foreign buyers, an anti-flipping tax on home buyers who sell a property within 12 months of purchasing it and a review of down-payment requirements for investors.

Admittedly, the federal government has been beset by one urgent issue after another these past two years. And 2021 campaign promises (an election the Liberals still managed to squeeze in) could still come to pass. Finance Minister Chrystia Freeland’s press secretary said this week that “housing affordability remains a priority for the federal government and … we will take further action in the upcoming budget.”

But on rising housing costs across the country, it feels almost too late. The Bank of Canada has identified investors as a major source of demand. A report from the central bank in January said the share of purchases by first-time home buyers has been declining since 2015 and “increased presence of investors in the housing market has contributed to strong demand.”

That same report pointed out that investors often rent out their properties, easing some of the housing crunch. But with competition from investors at least contributing to the out-of-control housing market, it’s surprising federal Housing Minister Ahmed Hussen made the remark last month that his government does not want to implement any policies that would harm “mom and pop” real estate investors.

“They provide rental stock to Canadian families and individuals. And so we don’t want to negatively affect them.”

It is a political dilemma to tame a market and still appeal to voters who already own, and don’t want their own properties to become affordable any time soon. The Canadian economy is also heavily weighted to real estate. But a focus on the circumstances of landlords is the wrong take when prices continue to soar out of sight for so many – never mind future generations.

Populist Pierre Poilievre, the first to declare his interest in the upcoming Conservative leadership race, will have a difficult time attracting mainstream voters with many of his policy positions, including his emphasis on the loaded “freedom” phrase. But the MP from Carleton has showed himself in touch by emphasizing a key concern for many Canadians with his hammering of the Liberals on the “housing-inflation crisis.”

With the average home price in Canada up nearly 50 per cent in the past two years, that housing-inflation will be a key theme for whoever becomes the next Conservative leader.

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