Regional housing market remains strong, though slowing
By: Viola Pruss
| Posted: Saturday, Jan 11, 2014 06:00 am
Housing trends in the Edmonton region expect a boom in condominium sales while sales for single-family homes are said to remain stable but static, based on the annual housing forecast by the Realtors Association of Edmonton.
Sales of single-family homes in Edmonton will remain at about 10,500, said association president Greg Steele at a conference on Wednesday, due to a shortage of inventory, higher prices and new homes entering the market.
Instead, multiple sales listings in outlying communities are expected to increase by about 1,000 units. Condominium sales are expected to grow by 2.5 per cent in 2014, offering a more affordable option for first-time buyers, he said.
“As housing prices have risen, condos have become the de-facto entering point for first-time homebuyers,” he said. “The ratio of condos to single family homes will rise as we see more young couples and families get into the market.”
Average condo prices are forecasted at $246,000, up two per cent from $241,377 last year. Condo prices have been rising at a slower rate, Steele said, as more units have become available in downtown Edmonton.
Prices for single-family homes are expected to increase by about three per cent to $422,000 in 2014. Sales may even set a new all-time peak, he said, surpassing the average sales price in June 2007, which was $424,500. In 2013, the average price for singles was $409,824.
No housing crisis expected
The building sector will most likely not ramp up construction of new homes in the region, he said, as construction firms are also in need of hiring more, qualified personnel. Nonetheless, another 60,000 people are slated to move to the province in 2014 – 30,000 of them are expected to settle in the Edmonton region.
Steele said he does not foresee another housing crisis, though some people may struggle with the rising cost in the rental and housing market related to low vacancy rates.
As of January, only 300 homes were listed in Edmonton but that number will grow in the spring as more sellers enter the market, he said.
“If you don’t have the choice in early January, you definitely will have the choice in March,” he said.
Pipeline connection a must, said chief economist
Despite its successes, there are many stressors that may affect the local economy and housing market in the long run, said John Rose, chief economist for the City of Edmonton.
Within the next 12 to 24 months, the province will need to find an answer to its pipeline problem, he said. Otherwise, Alberta will slug along with the Canadian economy at a modest growth of 1.5 to two per cent, he said.
“We continue to sell our oil at a discount while oil prices remain at a level that should sustain investment,” he said. “That gap means that we are not getting what we should get for oil resources. And that gap will continue to exist until we get some kind of closure on pipeline capacity.”
Without a pipeline connection, companies now setting up in the province may lose their confidence in the local economy which could transfer to job losses and drops in income, he later told the Gazette.
Local economy not unaffected by global, Canadian changes
For now, the Edmonton region is still outperforming the national economy significantly at about four per cent growth per year, he said. That growth is expected to slow down to between 3.5 to four per cent in coming years, and to below three per cent by 2017-2018, he said.
“That’s a reflection of the structure of our economy and knowing the negative implications in terms of the city’s limitations itself,” he said. “We’ve been able to attract an incredible number of net markets into the city and so our working age population is growing very, very quickly. More quickly recently than we’ve been able to generate jobs.”
Rose said the unemployment rate in Edmonton has gone up to about five per cent now, yet one in ten jobs in the country is still generated in Edmonton, he said. Based on the higher cost expected for rentals, gas and food in 2014, he said the inflation rate will likely rise, from one per cent to about 2 to 2.5 per cent in 2014.
Despite high expectations, Rose said global growth remained, at best, tepid in 2013. Many countries in Europe have entered another recession while the United States economy is only slowly improving, he said. That’s still good news as more than 90 per cent of the province’s exports go there, he said.
What the Edmonton market will have to watch out for in 2014 are issues expected in the housing market in Vancouver, Toronto and possibly Calgary. Rose said he worries that downturn could spook local consumers, despite the strong economy that’s prevailing here.
“People will start paying attention to the fact that there is an issue somewhere else and that Canadian housing prices, whatever that means, are coming down,” he said. “And be hesitant to make the investment they should be making here in Edmonton.”