As described by the ATB Economics team in their Weekly Wrap, Alberta’s housing market continues to work through high interest rates, driven by record migration and solid job gains.

"Benchmark resale home prices in Alberta rose for the 14th consecutive month, hitting a new high of $496K in January 2024. Meanwhile, national prices dipped for the 5th consecutive month to $718K, approaching their March lows.  

Calgary has been the outlier since the Bank of Canada started cranking up its policy rate in March 2022. It is the only large city with more than one million people where prices have actually increased since rates started going up. Average Calgary home prices rose 10% year-over-year to $569,400 in January."

Secondary suites as a solution 

How are people managing these tight inventories in Alberta? Secondary suites have become a popular solution. In the third quarter of 2023, the City of Calgary reported an 80 percent increase in the construction of secondary suites. The city says in new communities, applications for secondary suites are up by 114 per cent while in established communities, 351 secondary suite building permit applications were received, an increase of 33 per cent compared to the third quarter of 2022.

With Alberta’s hot housing market showing no sign of slowing down, many Albertans are looking at unique solutions when it comes to purchasing a home. A popular solution is purchasing a home with a secondary suite, or buying a home with adding a suite in mind, to help generate additional income for the homeowner.

With rental vacancy rates remaining low in Calgary and across Alberta, secondary suites are emerging as a way for home buyers to supplement their incomes, pay down their mortgage faster or offset living expenses. A legal secondary suite, compliant with City of Calgary standards, also adds a significant re-sale value to the home. Homes with a legal secondary suite are in high demand, so they tend to sell quickly.

Economic benefits of secondary suites

In such a competitive market, there are a few reasons why purchasing a home with a secondary suite can be beneficial to your bottom line. For example, prospective buyers are able to use projected rental income to help you qualify for a higher purchase price or afford a larger home. You could also use those funds towards improving the home, or adding a secondary suite, like a basement suite, for additional income.

What do I need to know about secondary suites? 

The City of Calgary has several requirements to ensure a secondary suite is legal. While there are certainly illegal suites on the rental and purchase market, these can create safety issues for tenants and homeowners. For example, illegal suites may not conform with zoning bylaws or the fire code. If the suites aren’t legal and in compliance with local laws, you also cannot use projected rental income to help you qualify for a mortgage.

If you live outside Calgary, check your city or town bylaws to ensure you are building or renting a legal suite. 

As you look to purchase a home, there are a number of things you can do to make the homebuying experience feel less stressful. 

Secure a mortgage pre-approval 

Given how quickly offers are made and accepted in Calgary and Alberta, getting a pre-approval can speed things up and ensure that you know how much you can borrow, putting you in a better position to make a strong and competitive offer. Your pre-approval will also include the mandatory stress test, so that you know how much you can afford to borrow

You can also have a conversation with your mortgage specialist to fully understand what conditions, if any, you may have as part of your mortgage approval. Knowing what you can spend in advance can help you focus your search on the right properties for you.

Understand how much you can spend

Next, have a close look at your budget. As mortgage approvals are based on gross, rather than net income, certain large monthly payments, like childcare, are generally not taken into account. Make sure you feel comfortable with your mortgage payment and make room for contingencies with your monthly recurring expenses. Owning a home can bring its share of surprises, so you’ll want to be able to cover your mortgage and repairs if the unexpected occurs. 

 It can be easy to get caught up in the excitement or urgency of purchasing a home. Arrange a talk with your mortgage advisor and realtor in advance, who can give you tips and tricks to avoid overextending yourself and putting your finances at risk. 

Further, some buyers are looking at smaller municipalities to help stretch their dollar further, as they are often priced lower than larger metropolitan areas, often with less competition.

Adding a secondary suite or purchasing a home with a built-in suite can be a great way to add to your income and afford your dream home. 

Meet Jessica.

A math geek at heart- Jessica Anderson began her career in the banking
industry 12 years ago and never looked back. Through her experience in
customer service, financial advice, risk management, and credit, she quickly
identified her passion for helping Albertans improve their financial health and
getting clients into their dream home. Jessica prides herself on her analytic but
creative thought process, that has enabled many unique and sometimes
difficult scenarios to get across the finish line. Jessica had the top client
satisfaction score across all of ATB Mortgage Services for the 2022/2023 fiscal
year. She is a mother of three girls, and enjoys diving into a good book when
she gets the chance.