Long Term Relationship Between Calgary House Prices and Alberta Economic Activity Diverge – Irrational Exuberance? February 24, 2008Posted by DustinRJay in Calgary real estate, long term real estate trends.
Tags: Alberta, calgary house prices, GDP per capita
The price of houses is linked to the economic well-being of the region. Recently, the Alberta economy has been extremely strong and Calgary house prices have increased tremendously. But the question remains, did house prices increase rationally in comparison to economic growth?
A comparison of house prices and GDP per capita show that they roughly track each other for 24 years and then sharply diverge. This could imply that recent asset valuations of houses have been irrationally exuberant, and a more rational valuation of ~$300,000 would be approprate given the current level of economic acitivity.