Want to buy a house in Calgary? You're not alone. Why the city's booming despite high interest rates

As interest rates climbed in Canada over the last year, so havemortgage payments. As a result, house prices in many markets have started to slow their steep ascent. The one major exception?Calgary.

The latest numbers from theCalgary Real Estate Board confirm it, with the average home price in Calgary at $539,461, up nearly 10 per cent compared to last year.

"I'm just surprised about the strength that we've continued to have in Calgary," said Ann-Marie Lurie,chief economist for the Calgary Real Estate Board, which called its July 2023 sales numbers the strongest reported, with a "record-setting pace."

In part, economists likeLurie pin the strength of the Calgary market on comparative pricing compared to other cities. Even as interest rates increase, the cost difference remains stark.

WATCH | Calgary's real estate market is sizzling:

Calgary real estate is on a tear, bucking the trend elsewhere

1 year ago

Duration 2:01

With its population booming, new housing in short supply and prices cheaper than bigger markets, Calgary's hot real estate market is bucking the cooling trend seen nearly everywhere else.

Numbers from the Teranet-National Bank House Price Indexback this up. For example, while prices in Toronto or Vancouver have dropped from their peak in spring 2022, they still remain relatively higher than Calgary.

Escalating mortgage costs may not discourage those coming from markets such as Toronto, with detached homes that often cost more than $1 million.According to Lurie, those buyers are "less sensitive to those higher interest rates"when they viewsimilar homes in Calgary with prices that are typicallyhundreds of thousands of dollars lower.

The 'gold rush'

For Nadine Faule, a realtor who specializes in helping clients relocate to Calgary from other parts of Canada and the world, the current market is "like the gold rush" for people struggling to afford homes in more expensive markets.

"Everybody wants to come to Calgary and we just don't have enough houses," said Faule, who spoke to CBC News from an open house showing in Calgary's Woodbine neighbourhood wherenine offers were placed on the home before the open house even began.

"Wehave such a lack of properties," she said.

Faule told CBC News she typically needs to advise buyers that while Calgary prices may be lower than other Canadian cities, the market is fast-moving, with sellers in the "driver's seat" in the current climate.

It's a vibe felt not just by real estate agents, but alsoby Calgarianslooking to buy.

"We thought it was gonna be way easier," said Alejandro Decker, who stopped by Faule's open house on a summer weekend. Over the last month, he's been lookingto buy a homefor his family of four.

"We find that we don't have choices," he said. "It's very frustrating."

And it's not just locals. Newcomers arriving inCalgary are definitely a factor in higher prices and tight supply, say housing market watchers.

"Let's not forget the population surge that is still ongoing," saidStfane Marion, chief economist with theNational Bank of Canada, who pointed out that new construction of housing otherwise known as "housing starts" are not keeping pace with the number of people migrating to Calgary.

Calgary is going to have an affordability issue in the not too distant future.- Stfane Marion,National Bank of Canada

Marion pointed out that a low level of housing starts contributes to a lack of supply in the Calgary market, and as more people move to the city, the demand for housing goes up.

More demand and a lack of supply almost always leadto higher prices, which helps explain part of why prices have kept rising in Calgary despite higher interest rates over the past few months.

"If it weren't for higher interest rates, I think the market would have been evenhotter than it is right now," said Marion.

Why Calgary and not elsewhere?

Alberta attracted more people from other provinces compared to anywhere else in Canada in the firstthree months of 2023, but real estate market numbers for the summer of 2023 don't seem to indicate price increases at the same level as Calgary's so far.

While numbers around population shifts are less frequently updated than real estate sales numbers,the Calgary Real Estate Board's Lurie saysmoremigrants and newcomersare heading for Calgary rather than Edmonton.

She also pointed out that the Edmonton market hada higher inventory or more properties available over the past few months, which eased pressures on supply, leading to a cooler real estate market.

Affordability issues could loom

With population increases expectedand low housing market inventory, the lack of affordabilityseen in markets like Toronto or Vancouver could be transferring to the Calgary region.

"Calgary is going to have an affordability issue inthe not too distant future," said the National Bank's Marion.

"Higher interest rates,with the population increase, hasled to a lack of apartments, a lack ofsupply, plus a very big increase in terms ofrent inflation," he said. "Thathas translated into people moving to Calgary from greater Vancouver and greater Toronto, that's undeniable."

However, economists also point out that Alberta remains relatively affordable compared to other Canadian regions.

"You've got to remember that before the pandemic, prices were falling. So you're really just kind ofplaying catch up tosome extent," said Rishi Sondhi, an economist with TD Bank.

"Yes,affordability is deteriorating in Alberta, but from a historical perspective, it'sstill quite decent," he said.