It’s still a bit of a bumpy ride for Edmonton real estate, but the market may get a boost from the opening of the Valley Line Southeast LRT this fall, and the under-construction Valley Line West LRT.
For now, spiked mortgage rates and other factors are impacting real estate markets across Canada: prices, listings and sales.
“Rising rates will cause economic growth to slow. This leads to higher unemployment and less wage growth, which, coupled with higher mortgage rates, will make access to home ownership more challenging,” cautions Bob Dugan, Chief Economist at Canada Mortgage and Housing Corporation (CMHC).
“Equally, rising rates will increase construction costs, mainly due to increased financing costs. Compounded with surging material costs and labour shortages, this constrains housing supply.
“Taken together, the Canadian housing markets are expected to experience a downturn by mid-2023. Estimating what is needed to solve Canada’s housing affordability crisis by 2030, this would then lead to more pressure on the rental segment. Potential homeowners will stay renting longer and rental vacancy rates will be even lower,” he adds.
Despite the hot market, Edmonton continues its determined focus on affordable housing. City stats show that Edmonton is on track to meet — and likely exceed — the affordable housing targets it set four years ago. In 2018, the city committed to spend $132 million for 600 supportive housing units, which includes helping tenants with a range of services, and 2,500 new or renovated affordable housing units from 2019 through 2022.”
Most stats and indicators suggest that, when it comes to Canada’s roller coaster real estate market, Edmonton may be a slight anomaly.
“Edmonton is one of the most affordable major cities in Canada and the increased mortgage rates to a more normal range will slow some buyers’ ability to buy,” notes the knowledgeable and plugged-in Tom Shearer, Broker/Owner of Edmonton’s Royal LePage Noralta Real Estate and former REALTORS® Association of Alberta (RAE) chair. “The strong local economy could counter the effects of rate hikes while some people are migrating to affordable housing and strong jobs from pricier locations within Canada.”
The rebounding from the past two years and the realities of post-pandemic business is a factor for all Edmonton business, particularly the prices, listings and sales of the Edmonton real estate market.
Comparing to 2019 (the last year for a normal, pre-COVID Edmonton market) it was a more conventional market, with more market activity into the spring and summer months. Prices were steadily declining since 2017, but average prices held steadily throughout most of the year.
Single family home average prices were $425,068, with sales hitting 10,375 for the year. Condos came in at $227,429.
“The residential real estate market in the Edmonton region had a busy start to the year as we saw continued activity from the previous year,” says Realtor Paul Gravelle of MaxWell Progressive and the current RAE chair. “The average price for single-family homes hit a record high of $510,988 in April.
“New listings and sales were fairly consistent in the first half of 2022, before starting to decrease in June. Activity has started to slow down somewhat into the summer months. Average prices for single family homes, condos and rowhouse/duplexes started to decline in June.”
The Edmonton market, like most real estate markets throughout Canada, is cooling off.
The hot market’s prices and low interest rates were unsustainable. CMHC’s Dugan points out that, “The cost of housing reached levels that are unaffordable for a large share of new home buyers, translating into a slowdown in 2022. The expected increases in borrowing costs will contribute to a further slowdown in house price growth in 2022 and 2023.
“In the high interest rate scenario, the national average price remains elevated but is set to decline by 5 per cent by mid-2023 compared to its level in early 2022. In the same forecast period, the moderate interest rate scenario sees a 3 per cent decline.
“Mortgage rates eventually start to stabilize in 2024,” Dugan projects. “Supported by rising household income and higher immigration, house prices are expected to return to positive but moderate growth. Elevated price levels persist over the forecast horizon, placing pressure on homeownership affordability.”
While the Edmonton market shows signs of being consistent with national averages, Gravelle adds that “Anytime we see a change to interest rates, we expect to see a domino effect across many industries, including the housing market. As interest rates increase, the amount of homes that prospective homeowners can buy decreases. This can cause some buyers to be priced out of the market or pushed into buying something smaller than they expected. Interest rates and inflation are also on the rise. Toronto and Vancouver are no longer the only markets feeling the effects,” he continues. “These increases will be felt more and more in the coming months. We expect to continue seeing a pattern of decline in average prices and sales in the Edmonton region.”
Despite uncontrollable factors, like mortgage rates and home prices, there is a uniquely Edmonton factor which may impact Edmonton’s real estate market: LRT – the Valley Line Southeast, opening this fall, and the work-in-progress Valley Line West.
Both LRT lines will increase mobility options for Edmontonians to access key destinations throughout the city. “The new LRT line will benefit commuters along the line by allowing more affordable transportation costs to work. This allows for additional buying power along these corridors,” Shearer says.
“These two lines will connect two major residential areas to downtown and the southeast industrial area. It will allow folks to live in more affordable housing a little further from work, yet still have a reasonable and reliable commute. We observed this when the LRT first connected to the U of A. It allowed workers and students to live in more affordable housing in the northeast when it wasn’t possible before.
“Generally speaking, we have seen prices increase in suburban areas that provide comfortable housing with access to good paying jobs.
“When it comes to Valley Line Southeast-downtown to Mill Woods, an interesting aspect will be the effect on the South East Industrial Area, along with how many people return to work downtown.
“There is also a desire for increased densification around LRT hubs, and this has already been happening in neighbourhoods like Strathearn and Bonnie Doon,” he notes.
Edmonton’s new LRT connections may trigger momentum in Edmonton’s real estate market. “With interest rates and inflation on the rise, people are looking to get more bang for their buck and may look towards the suburbs or bedroom communities as an option for more affordable housing opportunities,” Gravelle suggests.
“More accessible transit, like the LRT, could make it more appealing to move further away from the city centre. We have also seen an increase in the total net migration, with more than 16,000 new people calling Alberta home so far this year. With an increase in new people, always comes more demand for housing.”