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Prairies Housing Outlook:
Outperformance on Tap for Prairie Provinces 

Rishi Sondhi, Economist | 416-983-8806

Date Published: January 30, 2023




  • While average home prices are down across Canada, the decline in the Prairies has been comparatively smaller. This is partly a function of resilient sales activity in the region.
  • Moving forward, the same factors that have been propping up activity in the Prairies should keep the region outperforming the nation overall. Among other elements, this list includes a comparatively favourable affordability backdrop. 
  • Across the Prairies, sales and prices should bottom in the first half of this year, before staging a modest recovery thereafter.

A notable feature of the current Canadian housing landscape is the relative outperformance of Prairie markets. Indeed, while the country overall has seen a near-20% drop in monthly average home prices from their 2022 peak, prices in the Prairies are only down by an average of 6% (Chart 1).

A key factor behind this price outperformance is resilience in home sales. In Manitoba and Saskatchewan, home sales are down about 20% from their 2022 peaks, compared to a near-40% drop observed Canada-wide. Even in Alberta, where sales are also down about 40%, they're still well above pre-pandemic levels (Chart 2). 

Chart 1 shows the peak-to-trough decline in average home prices in 2022 in Saskatchewan, Alberta, Manitoba, and Canada. On this basis, prices have fallen 5.2% in Saskatchewan, 6.5% in Alberta, 6.6% in Manitoba and 19% in Canada.
Chart 2 shows monthly home sales in the Prairies (Saskatchewan, Manitoba and Alberta are summed) and the rest of Canada, indexed to February 2020, from January 2020 to December 2022. On this basis, sales in the Prairies have been stronger over the course of the pandemic. In the final 3 months of 2022 sales in the Prairies were 23% above pre-pandemic levels, on average, versus 29% below pre-pandemic levels in the rest of Canada.
Chart 3 shows the percentage deviation in TD's housing affordability metric (which measures annual mortgage payments as a share of household income), relative to its 10-year average in Saskatchewan, Alberta, Manitoba, and Canada in 2022Q4. In the final quarter of last year, Saskatchewan's affordability was only 8% worse than average, Alberta's was 12%, Manitoba's was 20% and Canada's was 25%.


Moving forward, the same factors that have been helping to prop up markets in the Prairies over the past year are likely to remain in place.  

Affordability is remains decent by historical standards in the Prairies, especially compared to other markets in the country (Chart 3). This a function of a smaller runup in prices in the region during the pandemic and years of weak price growth preceding it. Its affordability advantage has allowed the region to absorb the impact of higher rates better than other regions in Canada and should make it comparatively easy for potential buyers to jump into the market as the Bank of Canada likely halts its rate hike campaign and bond yields (which underpin fixed mortgage rates) grind lower.

Economic resilience is yet another factor that should help the Prairies outperform. Indeed, we are forecasting the Prairie economies to post relatively strong growth rates in 2023 and 2024 (Chart 4), with smaller increases in unemployment rates. Support to growth should come from still-elevated commodity prices and increased agricultural production. This year, households in Alberta will also see an important offset to the headwinds of higher interest rates, slowing job growth, and inflation from the provincial government's inflation relief package. 

Chart 4 shows our 2023 real GDP projections across provinces and Canada. We expect Alberta's economy to grow by 1.9% this year, Saskatchewan to grow at 1.7%, and NF and PEI to grow at  1.3%. Manitoba should grow at 1.2% and NS should expand by 0.8%. Meanwhile, Canada should grow at 0.7%, NB at 0.5%, B.C. at 0.5%, QC at 0.4% and Ontario at 0.3%.
Chart 5 shows net interprovincial migration into Alberta from 1962 to 2022. In the 3rd quarter of 2022, 19,285 people migrated into Alberta, on net, from other provinces. This was the highest level since 1980Q3 and well above the quarterly long-term average of 2,704. In the first and second quarters of 2022, net interprovincial migration totaled 4,850 and 9,857, respectively.
Chart 6 shows sales-to-new listings ratios in Saskatchewan, Alberta, Manitoba, and the rest of Canada as of December 2022. In December, the ratio was 60.6% in Alberta, 60.0% in Manitoba, 57.6% in Saskatchewan and slightly under 50% in the rest of Canada.

Population growth is improving across the region (Chart 5), supported by massive immigration and a record inflow of non-permanent residents. Alberta, in particular, has seen a surge of interprovincial migrants. Although there is an absence of data on this front, these types of migrants are probably more likely to purchase homes sooner than either immigrants or non-permanent residents. And, given a likely economic outperformance over the next few years and its affordability advantage over other large jurisdictions like Ontario and B.C., housing demand in Alberta should receive further support from this source.

Markets are also relatively tight across the Prairies (Chart 6), given comparatively elevated sales levels and falling new supply. Of the three Prairie provinces, listings have fallen the most in Alberta in recent months, mirroring the trend in sales. In fact, listings have declined by more in Alberta than the country overall since its market began to soften, while new resale supply trends have held up moderately better than nationally in Saskatchewan and Manitoba. 

Sales-to-new listings ratios in all three Prairie provinces remain around 60% - close to what is considered seller's territory. This level of tightness is consistent with rising prices and indeed, we saw price growth turn positive on a trend basis in December across the region.

Chart 7 shows annual average growth in home prices in Canada and the Prairies (simple average of each province is taken). Growth for 2022 and the average of 2023 and 2024 is shown. In 2022 average home prices increased 0.8% in Canada, and 4.0% across the Prairies. Over 2023 and 2024, annual home price growth is forecast to average -3.4% in Canada and -1.8% in the Prairies.

In the new home market, starts in the Prairies have run about 30% above their pre-pandemic levels, on average, over the past few years which is in line with Canada. A chunk of homes started in 2022 will be completed this year, but so far, oversupply in new home market has not been an issue. Unabsorbed inventory levels remain below long-term averages in the region, despite a recent uptick. 

Overall, sales and prices in the Prairies should bottom in the first half of the year before staging a modest recovery thereafter. We also see sales holding well above pre-pandemic levels through 2024, marking a steep contrast compared to the nation overall. This relatively resilient demand backdrop should also lead price growth in the Prairies to outperform the rest of Canada moving forward (Chart 7, also, our latest forecast).