Another year has gone by since Alberta’s latest recession came to its end, but it wasn’t just the recession that impacted Edmonton’s real estate market. The qualities of the economic recovery also played a part, especially given the particularly slow recovery pace that left many waiting in anticipation for the signs of a once-again stable economy. Add to that the instability of a provincial and now federal election and you have the perfect storm for real estate market disruption.
How has Edmonton’s real estate market been faring? Mark Barron Wilbert, Partner at Coldwell Banker Venture Realty, gives a snapshot of the REALTORS® Association of Edmonton’s figures:
“As of July 2019, the average selling price of residential homes was down 1.7 per cent year over year; new listings were down 10.01 per cent, and residential inventory was down 13.58 per cent. Residential sales for the month were up 11.49 per cent; however, for the year to date, all residential sales were down by 1.5 per cent year over year.
“The commercial side does not have a clear picture just yet, but we do have information on the starts (new builds) in both residential and commercial. Single-detached starts in the Edmonton area decreased in May by 34 per cent (to 335 units) from a year prior. This was the weakest performance in May since the 2016 Alberta recession. Year to date, single-family starts in Metro Edmonton have decreased by 32 per cent (to 1,350 units) from January to May 2018.” He adds, “2019 is shaping up to be the slowest year for single-family starts across the region since 2009. CMHC tallied 1,842 completed and unoccupied single and semi-detached units (including show homes) in the Edmonton CMA in May, down from 1,912 units in the preceding month.
“In terms of new multifamily builds, multi-family housing starts in greater Edmonton decreased in May by 42.5 per cent (to 260 units) from one-year-ago levels. All three types of multi-family units (semi, row, and apartment) were down from May of last year, with apartments seeing the biggest reduction. However, so far this year to date, multi-family starts across Metro Edmonton were up by almost 1 per cent (to 2,028 units). Weaker numbers for semi-detached and townhouse (row) starts to the end of May were offset by stronger new apartment activity.”
Those are the stats—but what does all of this mean for the state of Edmonton’s real estate market? Do the decreases in real estate across the board paint a negative picture of the Edmonton market? Not necessarily.
As Wilbert points out, “Last year was a record year for commercial real estate, and there were some very large deals that took place.”
This year, the numbers are down, but that isn’t necessarily a negative thing, as, “2019 was slower and steadier from the prior year, but I believe that was partially due to factors that created uncertainty in the minds of the consumers, such as the recent and upcoming elections.
“There are also positive signs, like the increased monthly sales year over year, the fact that total net migration increased to 10,474 people, and the fact that average weekly earnings, as well as the number of people working, has increased year over year. All of these improvements will positively impact Edmonton, as long as they continue,” stresses Wilbert.
He also points out that the signs of optimism are emerging through the shroud of uncertainty that has been clouding Edmonton’s real estate market since it was forced to navigate some pretty impactful changes. “Consumers are still impacted by the drastic changes that were imposed on the real estate market over the last several years,” he notes “but now, slowly, attempts are being made to backpedal and introduce new, beneficial programs, like the First-Time Home Buyer Incentive.”
However, it isn’t just about backpedaling; the struggles Edmonton’s real estate market faced over the past few years could also have the potential to become a teaching point.
“It became apparent that Canada has several different real estate markets, and that policies will impact each of them differently.”
Michael Brodrick, 2019 Chair, REALTORS® Association of Edmonton, agrees, pointing to the recently established stress test as a prime example. “The residential real estate market has been significantly impacted by federal lending policies. For instance, the mortgage stress test was designed to cool the markets in Toronto and Vancouver but was implemented as a national policy with total disregard for regional differences.”
That isn’t something, Brodrick emphasizes, that went over lightly either. “The federal policy has had a significant downward impact on the price point at which buyers can qualify for and purchase real estate, and this has lowered prices and negatively impacted home equity – a substantial asset for many homeowners. This equity will not be easily or quickly rebuilt.”
The impact on homebuyers is a significant one. As Brodrick points out, real estate has a larger impact on the Edmonton economy than might be expected.
“Home ownership stimulates the economy,” Brodrick says, “from the direct support of REALTORS®, home inspectors, and mortgage brokers to the retailers of furnishings, electronics, and maintenance provisions, to the municipalities that derive significant revenue from property taxes. The role of home ownership in creating economic diversity cannot be overlooked.”
“Based on RAE sales statistics,” he adds, “we estimate ancillary spending directly related to home ownership to be in excess of $1 billion over a three-year period.”
That’s a significant benefit to any economy, but especially to one that is still coping with the fallout of a recession and its uncharacteristically slow post-recession recovery.
Despite the challenges the Edmonton real estate market has been facing, though, the forecast isn’t just showing bad news. In fact, that there are still a few optimistic prognostications.
“The market is currently in a stable position, with a lot of the excess inventory from 2018 having been absorbed,” Brodrick points out. But at the same time, while “properties are still being bought and sold, they are taking longer to sell, and prices are down.”
In other words, there is optimism… with a grain of salt. Just like its recovery from the recession, Edmonton’s real estate market is steady, but slow. But hey, slow and steady wins the race, right?