Alberta real estate buyers waiting for better interest rates: report

Most Canadians in Alberta are holding off on buying a home until interest rates come back down.

“Rates have a long way to fall still before affordability is restored to recent norms,” said Robert Kavcic, senior economist at BMO Capital Markets, in a news release.

BMO released its real financial progress index in late April which revealed some hesitant homebuyers in Wild Rose Country. The report indicated that nearly two-thirds of Albertans looking to buy a home were waiting for interest rates to drop. Their reluctance amid the high interest rates stemmed from a few factors.

BMO’s report said some of the top reasons buyers cited were concerns were the cost of living, inflation, and an overall discomfort with their financial situation.

With all the uncertainty, BMO found that Albertans are opting to sit on the sidelines of the market until interest rates change. The Bank of Canada held its key interest rate at five per cent through April and the next update is expected in June.

While many homebuyers might not be jumping into the market right now, BMO indicated that it remains one of the biggest aspirations in the lives of Albertans with 68 per cent aspiring to own a home. Sadly, more than half (58 per cent) believe that homeownership is unattainable.

Nearly half of the respondents (46 per cent) said that they were planning to buy a home in the near future, but fewer respondents expected it to be in 2024. Just 15 per cent said that they were planning on purchasing a home in 2024, with just over one-third saying that they are looking at 2025 or later.

Although Albertans might be waiting on the real estate market, the index suggested that the vast majority (87 per cent) of Albertans believe they are making “real financial progress.”

That said, there were still economic stressors weighing on the financial minds of Albertans. Most are concerned about unexpected expenses and housing costs at 86 per cent and 74 per cent, respectively.

Despite apprehension by prospective homeowners, real estate continues to rise in Alberta with sales up more than 20 per cent year on year compared to 2023, according to a report from the Alberta Real Estate Association. While Albertans may be hesitating due to the interest rates, residents from other provinces are taking advantage of the market’s proportionally lower prices compared to other areas in the country like Ontario and British Columbia.

Alberta’s exploding real estate is especially true in Edmonton, which sold 2,168 homes in April — a 58 per cent leap compared to April 2023. Edmonton’s home prices are also significantly lower than Calgary, with a median price of $400,000 to Calgary’s $565,500.

BMO’s real financial progress index was launched in February 2021 and is meant to show how consumers feel about their personal finances and their financial progress. The goal of the index, BMO said, is to spark a dialogue to help consumers reach their financial goals.

The index is created from research conducted by Ipsos, who contacted roughly 2,500 Canadians for the index.

Some Canadians in Alberta may be holding out for lower interest rates but the longer they wait the more they are likely to pay if the current trend continues. While interest rates may come down, an inventory decrease of more than 14,000 and sales activity climbing means the prices of Alberta homes is less likely to come down.