Skip to content

Prairie housing markets draw in buyers seeking attractive returns

Slow rise in home prices versus mortgage size results in higher loan-to-value ratios
Prairie residential markets are primed for increased momentum in 2023 as out-of-province buyers pile in.

Buyers are piling into Prairie real estate, according to Re/Max Canada, as a number of factors – including affordable home prices – push up loan-to-value ratios.

Data analyzed for the brokerage’s 2023 Canada Housing Barometer Report identified four markets – Calgary, Edmonton, Saskatoon, and Regina – with loan-to-value ratios in the third quarter of 2022 higher than levels reported a decade ago in 2012.

The rise pointed to residential prices increasing more slowly than mortgage size, driven in part by a variety of local factors, including the slowdown in the oil patch and other segments of the Prairie economy.

Calgary, for example, saw the average residential price rise 18.2 per cent versus 2012 to $503,450, while the average mortgage increased 23.4 per cent. This resulted in an average loan-to-value ratio of 74 per cent, up from 71 per cent in 2012.

“Over the past decade, challenges in the resource sector cast a shadow over housing performance throughout the province,” Re/Max reported.

Regina saw the biggest leap in loan-to-value ratios, in part due to a downturn in the oil and gas sector between 2014 and 2020. The loan-to-value ratio increased to 88 per cent over the past decade from 78 per cent in 2012. This reflected a minimal three per cent increase in home prices to $321,738 while mortgage size increased 15.9 per cent to $283,151.

The more affordable prices combined with strengthening economic conditions are likely to result in a turnaround over the coming year, however.

“The market's trajectory changed during the pandemic, coming alive as the province's economic destiny changed course,” Re/Max stated of Calgary. “Buyers from the country's most expensive markets in British Columbia and Ontario are arriving almost daily, attracted to the city's affordable housing stock and well-paying job opportunities.

It’s a similar situation in Regina, where Re/Max said first-time buyers are fuelling the market.

“First-time buyers, move-up and move-over purchasers are fuelling homebuying activity in the city and suburban areas, with single-family detached homes between $300,000 and $500,000 experiencing the greatest demand,” the report stated, noting that a reviving economy has also drawn in buyers from Ontario and B.C.

“An influx of buyers from Ontario and British Columbia, has also helped stimulate homebuying activity in Regina, many arriving flush with cash from the sale of more expensive homes,” the report stated.

While first-time buyers typically have less equity to put towards purchases, even in markets that have seen less appreciation, pushing up loan-to-value ratios, Re/Max expects ratios to fall as buyers arrive with equity from more expensive markets such as Vancouver and Toronto, often drawn by work. Competition for limited stock will help push up residential prices, reducing the loan-to-value ratio.

“Major centres in Alberta and Saskatchewan are expected to see strong growth in the year ahead as provincial economies continue to operate on all cylinders,” Elton Ash, executive vice-president, ReMax Canada. "The upside from an investor point of view is there's going to be increased home valuations more likely, especially with cheaper pricing in those markets, and with the economic benefits." 

The scenario is consistent with the factors Re/Max said were largely responsible for loan-to-value ratios dropping country-wide over the past decade – equity gains, a shift in workers to smaller markets, and the transfer of intergenerational wealth that’s helped younger buyers afford homes.

Indeed, in Winnipeg and Vancouver, strong price appreciation – and in turn equity – have pushed down loan-to-value ratios from where they were a decade ago. Re/Max attributed the shift to equity gains and buyers taking advantage of prepayment options on their mortgages.

While the drop in Winnipeg was a single percentage point, from 79 per cent to 78 per cent, the local housing market has been robust. Winnipeg’s average residential price increased 46.6 per cent over the past decade to $364,612.

“During the pandemic, help from parents allowed younger buyers to enter the market with higher deposits and down payments. Newer Canadians are also accessing overseas resources to achieve home ownership,” Re/Max reported.

While this is likely to slow, and some buyers are sitting on the sidelines awaiting stabilization in interest rates, the relatively affordable nature of local real estate has attracted out-of-province buyers as in other Prairie markets.

“Many are investors attracted to the affordability aspect of the city and the return on investment,” Re/Max stated.