Housing slump nears end
Resale activity ‘picking up modestly’ amid strengthening labour market, economist says
Better times are likely ahead soon for Edmonton’s housing market, according to the recent update from Canada’s largest bank.
RBC released its monthly analysis of Canada’s housing market and found positive signs across the board for resales, with sales growing 1.9 per cent nationwide.
This suggests the market has bottomed, including here in Edmonton, says senior economist Robert Hogue with RBC in Toronto.
“In the last couple of months, we’ve seen resale activity picking up modestly,” with little sign real estate “is in a death spiral” with “bad news feeding on itself.”
In Edmonton, conditions have improved to the point where the economist sees the market nearing a recovery. In other words, the city’s housing market has likely reached its bottom of the slump.
As evidence, he points to resales growing from April into May by 3.5 per cent. That’s less than Calgary, which saw sales grow by about seven per cent. That said prices still fell, according to the Multiple Listings System (MLS) Home Price Index, by about 3.7 per cent year over year. But that’s modestly better than Calgary.
Despite the falling prices, Hogue says the long downturn in housing that took hold in 2015 with the fall of oil prices could be coming to an end. Then again, the market has shown starts fall recently, he adds.
“We thought by 2017 the market was starting to recover … but those hopes were more or less dashed by late 2018 with another round of oil industry turbulence.”
What’s more, he adds, the slump has been deeper in Alberta than elsewhere because it started about four years ago, whereas the Canada-wide bear market in housing — driven mostly by Toronto and Vancouver — began in early 2017.
While the Edmonton market is unlikely to heat up soon, Hogue suggests the worst is behind the city’s housing market.
Helping buoy the optimistic take on housing is a strengthening labour market. The City of Edmonton’s assessment for the month found the economy added 31,000 jobs compared to the same month in 2018. The unemployment rate also fell slightly in May compared with April, from 6.9 per cent to 6.8 per cent.
“When you have a strong labour market, it definitely helps the housing market,” he says.
More workers come to the city seeking jobs, and renting at first.
And with added confidence in the economy, “they’re more likely to make larger commitments — like buying a home.”
He further notes Edmonton and Calgary are largely in sync regarding current and future conditions.
“The signs in April and May were not quite as strong in Edmonton.”
Hogue suggests a new provincial government and approval of the Trans Mountain pipeline — while not having direct impacts, at least yet — boost confidence.
What’s more, interest rates appear to be headed downward.
“Just a few months ago, this would be an element that would have a restraining effect on housing demand.”
All of these indicators suggest, Hogue adds, “the market is moving in the right direction.”