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Friday, February 25, 2011 - Alberta now home to cheap housing

Canadians confronted with soaring prices while trying to buy a home in Toronto, Vancouver and Montreal this past year should consider Alberta — once the poster child for and overheated market, but now the most affordable province in the country according to a new report from RBC Economics Research said Thursday.

Robert Hogue, senior economist with RBC and author of the report, said a combination of a housing bust, slowing economy and population outflows starting as far back as 2007 has created a real estate market that has been “sideways at best” for the past few years and finally resulted in the province becoming officially the cheapest in the fourth quarter of 2010.

“From 2000 to 2007, the Albertan housing market was on fire. There was not enough supply, so prices shot through the roof, but in 2007 demand started to cool,” he said. “Any pressure on prices since has been downwards.”

Douglas Porter, deputy chief economist with BMO Capital Markets, said Alberta was hit particularly hard by the recession and the subsequent plunge in oil prices that put much-needed investments in the oil sands on hold. This has had a long-lasting impact on housing prices in the region.

“Last year when there was a lot of focus on the strength of various markets including Vancouver, Toronto, Montreal and Winnipeg, a notable laggard was Alberta,” he said. “That sustained softness in prices has left the region relatively affordable versus much of the rest of the country.”

The report, published since 1985, uses the costs of owning a detached bungalow as a benchmark for measuring home ownership affordability in major cities across the country. This includes mortgage payments, utilities and property taxes and is expressed as a percentage of monthly income.

While the data points to slight decreases across the country the greatest declines by far were in Alberta.

In Calgary, the measure plunged 3.1 percentage points to 34.9%, while in Edmonton the figure decreased 2.4 percentage points to 31%.

Nationally, the measure dropped by 80 basis points to 39.9%.

Part of the reason affordability has skewed upward in Alberta is that the unemployment level has remained relatively low, with many families dual-wage earners with above-average salaries. Throw in cheaper prices, and a family in Edmonton can suddenly afford a nice, big house they otherwise would not have been able to elsewhere, Mr. Hogue said.

At the ground level, real estate agents in Alberta have definitely noticed prices coming down, which of course makes it a great time to buy in their eyes.

Mike Leibel, a realtor in Calgary, said there’s been a glut of foreclosures, creating a market of low prices.

“I’m amazed at how far the prices have come down,” he said.

Aaryn Lightbown, a realtor in Red Deer, Alta., said her sales this January are up 7%, but prices have come down.

“Part of it is we just needed it to come down. It’s cyclical,” she said.

Both Mr. Porter and Mr. Hogue suspect the current lull in pricing will be short-lived, thanks to surging oil prices and the economic recovery.

“Between robust commodity prices and rising production in the oil sands, we’ll see strong growth from Alberta,” Mr. Porter said.

Ms. Lightbown recently spoke with a realtor friend in Edmonton, who said home prices have jumped 5% in a month. Red Deer tends to lag behind Edmonton and Calgary a little bit, so she’ll soon know whether or not a new price boom will reach her neck of the woods.

“If their market starts skyrocketing, we’ll start skyrocketing as well,” she said.

posted in General at Fri, 25 Feb 2011 08:12:06 -0700

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