Buying a house costs a lot less in Edmonton than Calgary. Why is that?

Three hours on Alberta's QEII highway can make a $200,000 difference in the price of a home.

If you want to own a detached house in Calgary, average prices are currently just shy of $700,000.

Three hundred kilometres north, similar properties in Edmonton will run you a bit less than $500,000, on average.

And if you're a renter, you can expect to shell out $2,150 per month for a two-bedroom apartment in Calgary. In Edmonton, monthly costs have been rising, but they're still roughly $500 less, according to Rentals.ca.

Benchmark residential prices between the two cities have grown further apart, with Edmonton costs staying essentially flat compared to the same time last year, while they've shot up more than 10 per cent in Calgary, even with rising interest rates.

Across all housing types — detached, semi-detached, townhouses and apartment condominiums — the average selling price of homes in Edmonton was about $398,000 in August, compared to $570,000 in Calgary.

So what's driving these differences in housing costs between Alberta's two biggest urban centres? Here are some of the factors behind the affordability gulf.

Shopping around

People have been flocking to Alberta this year. In just the first three months of 2023, the province welcomed nearly 16,000 people from other parts of Canada.

Real estate agents say prospective homebuyers looking to the Prairies after getting priced out of Toronto or Vancouver tend to consider Calgary first.

It's slightly larger than Edmonton and a major travel hub that people might have passed through or visited before.

"Calgary just does a better job of putting themselves on the radar," said Tom Shearer, broker for Royal LePage Noralta Real Estate, which has offices in Edmonton and surrounding communities.

"People are looking for more affordable housing or places where they can start their families … they start investing in, 'What's the next biggest centre I can go to?'"

The Rockies also loom large in buyers' decisions about which city to call home. Kananaskis and Banff are only a short drive from Calgary. Edmonton real estate agents say that easy access to an outdoor lifestyle is just too tempting for many buyers.

Edmonton real estate agent Leanna Martens says some buyers are making different choices about quality of life, considering the current cities' price differences.

She recently helped a couple planning a move to Alberta buy a home in Edmonton. They looked at Calgary too, but spiking housing costs sent them in a different direction.

"They opted for Edmonton because I can find them a better home for less money, and then they can still get almost everything," Martens said. "So they were willing to give up the mountains, the proximity, all the other stuff."

Supply and demand

And Alberta isn't only seeing interprovincial migration. In the first three months of this year, the province welcomed close to 36,000 people who arrived from outside Canada.

Whether looking for a home to buy or an apartment to rent, all these newcomers need to find a place to live.

In terms of homes to buy, Calgary is seeing a tighter supply. Melanie Boles, chair of the Realtors Association of Edmonton, says Edmonton isn't seeing the same supply crunch that's driving a seller's market in Calgary.

The Calgary Real Estate Board reported record low inventory for the month of August this year, with only about a month of housing supply. (That means that at current sales volumes, all the homes now listed for sale would be snapped up in about four weeks.)

On the other hand, there's still about three months of supply in Edmonton.

"That brings us into a balanced market here — you don't have that pressure on the pricing, and it's allowing the consumer some time to make their decisions," Boles said.

As high interest rates push up the cost of borrowing for a mortgage, Edmonton's market has stayed predictable, Boles said. More buyers have turned to less expensive properties, with sales picking up for condos and townhouses.

The tale of two cities

It's no surprise to real estate watchers that housing costs are steadier in Edmonton.

"I'd say it's the least exciting real estate market in all of Canada," said Shearer.

"We don't go up high; we don't go down low."

Boles said that's long been a feature of the city's market, while Calgary can be more prone to sharp rises and falls, following the boom-and-bust cycle of oil and gas.

That's part of the demographic differences between the cities: Edmonton's job market has a bigger emphasis on government and the public sector, while Calgary is seen as the white-collar town with more businesses and corporate headquarters.

Agents say they'll be watching the market closely over the next year, and whether affordability concerns in Calgary could have a bigger spillover effect for Edmonton.

But for now, Boles said her organization isn't projecting the kind of surge Calgary is experiencing.

"We're not saying to our sellers, 'Hold on, because prices are going way up.' We're seeing a very consistent market with consistent, reasonable growth for where we are," she said.

"We've said 'consistent and stable' so often this year."