Home buyers in Alberta’s capital remain on the sidelines, boosting the rental market as residential sales continue to lag.
The market for newly built homes has been especially slow, according to a new report from market analysts at Altus Group.
“We’re seeing a reduction in presales activity, and we’re seeing a lot of condominium projects actually pivot over to the purpose-built rental market,” said Matthew Boukall, vice president of product management and data solution at Altus.
Edmonton’s residential real estate has been in a downturn for the past five years, but Altus says it has noted weaker new home demand in both Edmonton’s suburban and inner-city market this year compared with 2018. Condominium apartment sales are down – at about half the level reached in 2017 – and total new multifamily sales are also down.
The Altus report says that, “after improving in 2017, total new multifamily sales [townhouse and apartment combined] reversed down again. Total sales for the year reached only about 1,300 units in 2018, down by about one-third from 2017.” There was some positive momentum for new townhouse sales, but the plunge in new condo sales resulted in an overall decrease in new multifamily sales, pegged at 244 – far below the 323 sales registered in first quarter 2018.
Excess inventories continue to bedevil the condo market. The Altus report showed approximately 1,700 unsold condominium apartment units at the end of the first quarter of 2019 – a three-and-a-half year supply – one in three of which was in a completed project. Ten new condo projects were launched in 2018, representing more than 900 new units, with one project subsequently cancelled and changed to rental.
“A shift [of] people choosing to rent for the short term instead of [owning] doesn’t necessarily mean its robbing housing demand, it’s just shifting priorities for consumers,” Mr. Boukall said. “And, if anything, that may create some medium-term demand back into the ownership market as people decide to settle and get back into owning a condo.”
Michael Brodrick, chairman of the Realtors Association of Edmonton, says buyers are firmly in the driver’s seat in the city’s residential market.
“Last year we saw record inventory levels in some months, so that makes it a buyers market because you can look at as many houses as you want to [and] make an offer or don’t make an offer,” he said.
Altus said its survey of home-buyer intentions showed a marked decrease this spring from a year earlier, with just 4 per cent of all households saying they were looking to buy a home in the next year, down from 11 per cent in 2018. Among current renters, the primary pool for potential first-time buyers, the number dropped from 7 per cent in 2018 to just 5 per cent in 2019.
Soon-to-be first time home buyers could currently be renting, living with parents or a multitude of possibilities. Existing homeowners could list before selling or make a purchasing decision before selling, making it difficult to always pinpoint the direction of intentions.
“Housing is a continuum of choices,” Mr. Boukall explained. “There are a number of different factors which make it difficult to pin a purchase decision to one economic indicator.”
As the provincial capital, Edmonton’s residential real estate market is particularly vulnerable to governmental change.
“One of the things the new government talked about was looking at how the government is operating and how the government is spending money and possible cuts to government employment, so that’s something that still has people thinking here,” Mr. Brodrick said.
Altus, however, sees signs of positive momentum, reporting that, “Edmonton households are less concerned this year about potential job losses than was the case in the Spring of 2018, which may start to soon help revive home buying intentions – and actual activity.”
“We’re cautiously optimistic that [the market downturn] is a relatively short term phenomenon,” Mr. Boukall said. “And we’ll see some of the drivers of ownership start to grow with stability in the economy and anticipated benefits from the pipeline approval.”
“There are some positive trends that should contribute to some growth in economy and growth in housing demand,” Mr. Boukall said. “There’s a little bit of uncertainty, people may take a bit of a latency approach where they want to see the better economy, see growth in oil pricing … and just be a little more confident with the direction before they make the decision to get back into the ownership market.”
Uncertainty in the residential market continues to ripple through the industry. In June, construction was halted on a transit-oriented project in the city’s northeast after Kingsett Mortgage Corp., which had lent developer Station Point Developments $17-million, was placed in receivership. The project, first envisioned as condo, then switched to purpose-built rental, is about 78 per cent complete and the developers say they require another $6.9-million to finish.