Alberta house prices lag YET land rises and offshore buyers jump

If benchmarks measuring real estate and home building trends in Western Canada outside of B.C. are any guide, what is happening in Alberta is just plain confusing, at least at first glance. Given a benchmark of 100 for new home prices back in 2007, today’s reading of 99.5 means that over the past ten years, new home prices have barely budged. Yet using the same benchmark period, land prices have risen

Land maintains an edge in value over house costs since 2007

from 100 to 106.8. That’s not a huge move but one that indicates a growing problem in larger cities; land availability. And since land and houses go together, the interpretation offered is that overall home prices in Alberta have declined by about four per-cent over ten years.

It’s leading to increased intensification such as infill housing, smaller homes, and even laneway developments. However, some cities are slow to allow this, not mention slow to loosen restrictions making more land available. They must, however,  if the home building industry is to enjoy any type of positive pattern.

Foreign buyers looking for ‘big’
At the same time, while home prices in Alberta may be showing signs of weakness, it’s attracting a new source of interest: offshore buyers. Mind you, these purchasers are looking for luxury homes valued at $1.5 million or more.

Massive square footage and large acreages make Alberta homes appealing to foreigners with money to spend, according to some of the leading prestige real estate agencies. One agent quoted in local media claimed that 70 per cent of inquiries by phone or internet are from out of country contacts, the majority of those being Chinese. Perhaps as new taxes aimed at foreign buyers take hold in Vancouver, Alberta is starting to gain some appeal.

While Alberta stills falls in fourth place, well behind Ontario, British Columbia and Quebec in terms of inquiries from foreign prospects, the province has been gaining ground. Part of the appeal are the lot acreages associated with Alberta’s luxury homes, not just current price points. Many inquiries also include questions about the province’s culture. The laid-back attitude of Alberta versus the more cosmopolitan atmospheres of other areas in Canada definitely has its attractions.  Many Asians are reportedly looking at the province as a comfortable place to raise families, put down roots and give their children a place to live while studying in the country.

As Woody Allen’s ‘father’ famously said: “Every man should own a piece of land!”

For European buyers with U.S. dollars in their accounts, the current low-valued Canadian dollar also makes the market interesting. Mountains, lakes, and open spaces have always been something Europeans see as highly desirable.

As stagnant as the real estate market may seem in Alberta in terms of general housing, interest from foreigners in luxury properties is a bright spot, and one on which builders and renovators might be able to focus until more mid-priced opportunities present themselves.

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