The problem with trying to gauge the heat of Canada's housing market is that it depends on where you insert the thermometer. Over all, the market still looks unsustainably warm, but the nationwide numbers are being skewed big-time by scorchingly hot Calgary. If we remove this one city from the equation, the national housing landscape actually looks quite refreshingly cool.
Consider Thursday's new-home price report from Statistics Canada. Nationally, the country's prices for newly built houses were up 0.1 per cent in May from April, and up 1.5 per cent from a year earlier. Not exactly gangbuster gains, but still showing an upward trajectory for housing prices that many feel have run up too far for too long.
But prices in Calgary, which makes up just over 12 per cent of Statscan's new-home price index, jumped 0.8 per cent in the month, and were up 7.6 per cent year over year – far and away the biggest gains for any of the 21 metropolitan areas tracked by the index. (On an annual basis, nowhere else even reached 3 per cent.) If you exclude Calgary from the calculation, new-home prices in the rest of the country didn't rise at all in April, and were up just 0.6 per cent from a year earlier – pretty tepid stuff.
The surprisingly strong housing starts report from earlier this week showed much the same. National starts were running at an annualized clip of 198,000 in June – up slightly from May, and the highest in eight months. But again, Calgary was the main driver, topping 28,000 annualized in June, more than any other city in the country, and more than double the city's May pace.
If Calgary had merely matched its average monthly rate of starts for the previous six months (which was, it should be noted, still far higher than its average for the six previous months, or the six months before that), the national housing start number would have been 182,000 – a more sustainable long-term pace that roughly matches annual demographic formation of new households.
In the first half of 2014, Calgary's total housing starts are up 67 per cent from a year earlier (including an astounding 141-per-cent jump in condo starts); excluding Calgary, the rest of Canada's housing starts are down 0.6 per cent.
There's a similar tale in the national building permits data, also released this week. Residential permits nationwide were up 9.5 per cent in May from April – but Calgary's permits surged 35 per cent. For the year to date, Canada's residential permits are virtually flat with the same period last year; Calgary's are up 13 per cent, with the highest dollar-value increase of any urban centre in the country. (Alberta's other major city, Edmonton, is second.)
So, much like the country's economy as a whole, the housing market is operating at two speeds – one for booming Alberta (where Calgary is the epicentre of the thriving oil business), and one for much of the rest of the country, where growth is downright sedate. We've seen this pattern in gross domestic product, in employment, and now in housing.
While it's certainly comforting to see that housing across the majority of the country is undergoing a healthy cooling, localized housing bubbles can nevertheless pose a serious risk to a national economy. But Robert Kavcic, senior economist at Bank of Montreal, doesn't see Calgary and Alberta as a bubble threat. He said this week that the busy housing market is justified, given Alberta's relatively thin housing supply and strong employment growth that is luring more people to the province. That should support continued construction and price growth, particularly in Calgary, for a while yet.