Softening Economy to Affect Edmonton Housing Sales in 2017

By Sheila O’Hearn, Zoocasa

It won’t be the smoothest year ahead for Alberta housing markets. While the increase in year-over-year unit sales and prices on the Edmonton real estate and Calgary real estate fronts indicate growing consumer confidence for 2017, according to the latest report from REALTORS® Association of Edmonton, the downside is that oil prices, carbon levy impacts, U.S. trade measure uncertainties and anticipated low employment rates could curb that initial optimism.

Reported unit sales for all residential listings in the Edmonton Census Metropolitan Area (CMA) were strong in January, increasing 19.4% compared to the same month in 2016. Relative to December 2016, reported unit sales also increased by 3%.

The CMA shows that unit prices were consistently stable with only modest decreases across each category. Compared to January 2016, condominium prices increased 8.7% and duplex/row houses increased eight per cent. Both categories decreased only slightly, comparative to December 2016, with condominiums down 0.37% and duplex/row houses down 0.4%. The average price of a single family home remained stable at $416,859, which is down 0.49% relative to January 2016, and down 0.9% , compared to December 2016.

Senior analyst Don Campbell (Real Estate Investment Network) acknowledges that Edmonton has profited from a stable government workforce and major construction projects, such as northeast Anthony Henday Drive, the towers in the Ice District and Rogers Place, but building work is almost finished now, and deficit-laden governments won't take on many new employees this year – all of which could lead to a softening economy that isn't good for housing prices, where the market is slowing down for sellers and buyers are stalled.

Campbell forecasts that Edmonton prices will remain flat in 2017, cautioning that Edmonton residents shouldn't celebrate just yet. He anticipates housing in the $300,000 to $400,000 range will be the most popular in the next few years, due in part to new federal mortgage rules, reducing the amount many people can borrow. He views the strongest demand for smaller two- or three-bedroom homes in good condition, smaller lots, and homes within 800 metres of an LRT station, but warns that people shouldn't buy unless they plan to keep their property for at least five years.

Condo lifestyle, on the other hand, is becoming a viable choice for the next generation.

Following is a summary of the Real Estate Association of Edmonton Fourth Quarter Market Report for 2016:

 

New Single-Family Housing (Edmonton CMA): Single-detached housing starts increased in November by 6.6 per cent year-over-year to 436 units. Most of the improvement came within the city of Edmonton, while the suburban municipalities in total were unchanged from November 2015.

 

New House Average Prices (Edmonton CMA): According to CMHC, the average absorbed new house price for the Edmonton region decreased in October by 8.7 per cent year-over-year to $539,539. After 10 months in 2016, the average absorbed price declined by 4.1 per cent from January to October 2015 to $580,577.

 

Multi-family Housing Starts (Edmonton CMA): Multiple unit starts in Metro Edmonton decreased in November by 58 per cent from the year before to 550 units. While semi-detached starts were up by 2.2 per cent from November 2015, both row and apartment starts declined by 67.8 per cent year-over-year to 364 units.

 

Multi-family Housing Starts (YTD) (Edmonton CMA): To the end of November 2016, multi-family starts have decreased across the Greater Edmonton area by 50.5 per cent to 5,398 units. In 2015, multiple dwelling starts had hit a record level. Despite slowdown, activity in 2016 has remained comparatively strong by historic standards.

 

The Bottom Line:

 

The association forecast for 2017 is for real estate agents to expect another listless year, full of cautious buyers and economic uncertainty.

 

The association also anticipates, however, a small surge in popular duplex sales in 2017, especially due to mortgage qualification rule changes. New stresses on insured mortgages could indicate that some buyers, edged out of the market for more expensive, detached homes, will now be looking at cheaper townhouses in suburban areas offering a higher quality selection that’s expected to keep prices stable this year.

 

Zoocasa is a real estate brokerage based in Toronto.

 

Sheila O’Hearn is a freelance and creative writer, and has worn many hats throughout her career, from general staff reporter to magazine editor. She has a keen interest in business entrepreneurship and currently writes for several outlets. Visit her at LinkedIn for more info.