Soaring housing prices have not yet thrown a wrench into moves to attract new workers to either Calgary or Edmonton.
Officials in both cities claim their respective communities remain competitive, even though the cost of buying a resale home has gone through the roof.
Based on a comparison between the months of December 2005 and December 2006, the price of a single- family home in Edmonton rose 51.9 per cent, coming in at just under $342,000, according to the Edmonton Real Estate Board (EREB).
Its Calgary counterpart, the Calgary Real Estate Board (CREB), reports that the average price of a single-family home rose to $396,870 in December 2006, from $305,676 in December 2005.
And while both CREB and EREB say they have heard anecdotal talk that higher housing costs are causing problems for companies bringing workers to Alberta's understaffed labour market, neither has been able to find any concrete examples.
In fact, new CREB president Ron Stanners says it's actually cheaper to buy a house today in Calgary than it was in the past.
"There's a lot of talk about it (higher housing prices acting as a disincentive to bring employees to Alberta) but the reality is that housing prices, at the prices they are today, are a lot more affordable than they were 25 years ago," says Stanners.
Interest rates back then were above 18 per cent, compared to today's interest rates in the six- per-cent range. And incomes are now much higher.
Using the example of a typical Calgary housing price of $106,000 in 1981, with a $90,000 mortgage and an interest rate of 18.125 per cent, a buyer would have made mortgage payments of $1,319, representing 79 per cent of their annual income of $19,932.
Today, using identical comparisons but with an average housing price of $357,000 and a $332,000 mortgage at about a six-per-cent interest rate, the payment would be $2,125.
But with an average income of $60,000 in Calgary, the mortgage costs only eat up 42.5 per cent of that person's income now, says Stanners.
"We are way better off than when I bought a house on New Year's Eve in 1981," says Stanners. "I really don't believe affordability is an issue. It's affordability in the mind that is an issue. I guess you could say it's perception."
Myron Borys, vice-president of economic development for Edmonton Economic Devel-opment Corp., says Edmonton is transitioning from a mid-sized Prairie town into one of the country's economic powerhouses.
"As such, you have to put yourself in a different comparison point," says Borys. "We're still a very affordable place to live."
EREB figures from November 2006 place Edmonton below the Alberta and Canadian price averages.
Overall, Edmonton came in fifth behind Vancouver, Fort McMurray, Calgary and Toronto.
Borys agrees that housing affordability in Edmonton has definitely eroded somewhat over the last year, but he says when it comes to attracting businesses to Edmonton, housing costs are not a huge factor.
"It's not on the Top 10 of what a business would look at," he says.
"Last year, we had record numbers of immigration both provincially and in the city. So obviously, it's not a single factor affecting people's decision to move here. It could be in the future if it (housing prices) continues to rise at the rate it does."
It also matters where people are moving from, he adds. "If they're coming from Vancouver or Calgary, it's not an issue. But if we compare our prices to smaller centres, they're higher - but it has always been higher (in this type of comparison)."
Adam Legge, director of research and business information for Calgary Economic Development, expresses a similar viewpoint when asked if rising housing costs are making it harder to attract employees to Calgary.
"It depends where someone is coming from, and at what income level the employment opportunity is going to provide them with," says Legge.
Legge also says that the Royal Bank's housing affordability index shows that housing in Calgary and Edmonton is still more affordable than in Toronto, Montreal and Vancouver, relative to incomes.
Meanwhile, both the CREB and EREB expect the housing market to have another good year in their cities.
"We're predicting that prices will continue to rise in 2007, about one to two per cent per month. Overall, we're predicting an increase in prices of 15 per cent for the total year," says incoming EREB president Carolyn Pratt.
"We have a lot of demand and the inventory is down, and that's what's driving up the prices. We expect inventory levels to remain below our normal numbers of listings," adds Pratt.
In Calgary, Stanners says the CREB is calling for residential real estate prices to increase by about 7.5 per cent over the year.
"I expect that the first quarter and maybe into the second quarter will be similar to last year and be fairly complex," says Stanners, pointing to homes that sold below, at, or above asking prices in 2006. "But it will stabilize and become fairly solid early in the second quarter."
(Laura Severs can be reached at laura@businessedge.ca)
