The Canadian real estate market has been red-hot in nearly every pocket of the country since the start of the coronavirus pandemic, from the rural communities of Atlantic Canada to the major urban centres of Ontario and British Columbia and Prairie real estate markets. Whether this will continue in a rising interest rate environment remains to be seen, but this could be a prime opportunity for homebuyers and investors to take advantage of the dip and discounts.
But where in this type of market could someone invest in residential property and enjoy a return?
This is the $711,000 question (the average price of a home in Canada in May 2022, per the Canadian Real Estate Association) since most segments of Canada’s housing market are still way above their pre-pandemic levels. For now, with some markets and prices starting to soften, three notable markets in the Prairies could be bastions of investment opportunities.
Three Hot Prairie Real Estate Markets to Invest in
#1 Winnipeg, Manitoba
The city of Winnipeg is expected to be one of the top economic performers nationwide this year as the municipality enjoys economic and population gains. But what about the Winnipeg real estate market? It is already showing signs that it could buck the nationwide trend and post impressive numbers, even if they slipped.
In May, residential property sales tumbled 14 per cent, with a total of 1,723 transactions. However, May 2021 was one of the best months on record, and May 2022 was still one of the best months on record.
According to the Winnipeg Regional Real Estate Board (WRREB), the price for an average single-family home rose 1.65 per cent to $454,832 in May.
Supply continues to lag, but both active and new residential listings have been catching up from last year, down one per cent and five per cent, respectively.
“While playing some catch-up this spring on one that has been delayed from a harsh, long winter, prices have been well ahead of 2021 from the very beginning,” said RE/MAX Broker Akash Bedi, the 2022 president of the Winnipeg Regional Real Estate Board, in a news release. “Rising interest rates are upon us with more to come, and that, in combination with a healthy injection of new listing supply, should help slow the pace of price increases as evident already from this month.”
Despite the latest improvements, conditions remain extremely tight, and it will take time for the Winnipeg real estate market to return to balance.
#2 Saskatoon, Saskatchewan
Is Saskatoon Canada’s best-kept secret?
Indeed, for years, Saskatchewan had been on the cusp of functioning as a key economic player in the Canadian economy. Today, this could finally be realized because of its rich resource-led economy, which has also enjoyed modest diversification in recent years.
Despite its incredible prospects, the housing market in Saskatoon and the broader province remains more affordable than other places in the Canadian real estate sector.
Here is a look at the latest housing data released in May, courtesy of the Saskatchewan Realtors Association (SRA):
According to the Saskatchewan Realtors Association (SRA), housing sales advanced nearly 17 per cent to 538 units, up from 461.
Home prices have increased, but they have not completely exploded; the Saskatoon real estate market has not left every prospective homeowner sitting on the sidelines.
Association data highlight that the median sale price in May was $352,000, up a tepid 0.57 per cent month-over-month
In addition, supply is back on the rise, with new listings and total inventory levels climbing to 858 units and 1,145 units, respectively. However, demand appears to remain strong as homebuyers scoop up these listings quickly: The average number of days on the market is 33 days, down from 45 at the start of the year.
#3 Edmonton, Alberta
Of all the major urban centres in Canada, Edmonton is perhaps the most affordable municipality in the country. But this may not be the case for much longer as prices maintain their upward trajectory.
Data from the REALTORS® Association of Edmonton (RAE) highlight that residential property sales fell 1.6 per cent month-over-month in May. This is up 4.4 per cent year-over-year.
Home prices rose at an annualized pace of 9.2 per cent in May, as the MLS® Home Price Index (HPI) topped $417,300. Here is a look at how the different properties performed to kick off the second quarter on a year-over-year basis in the Edmonton real estate market:
- Single-Family Detached Homes: +5.7 per cent to $492,037
- Duplexes: +10.5 per cent to $395,783
- Condos: -1.2 per cent to $239,011
“We’re starting to see a slow down of the real estate market in the Greater Edmonton Area as we head into the early days of summer,” says REALTORS® Association of Edmonton Chair Paul Gravelle. “While we continue to see a lot of activity in the market, we’re not seeing as big of month-to-month changes for pricing, sales and days-on-market that we did earlier this year.:
Homebuyers are acquiring residential properties quickly as single-family homes averaged 23 days on the market, which is steady month-over-month.
Will Higher Interest Rates Cool Housing Investment?
When interest rates go up, housing investment typically goes down for two reasons. The first is that borrowing costs climb, making it more expensive and even harder to receive financing to invest in a residential property. The second is that investors will typically seek out lower-risk yield-bearing assets, such as bonds and GICs. However, with prices at modest levels in these three markets, perhaps investors will pour into these municipalities and add more supply, which is always welcomed in today’s economy.