Real estate market momentum expected to slow
The hot streak in Edmonton's real estate market is likely to fizzle early into next year, a new report suggests.
Altus Group released its quarterly forecast for housing across Canada, and it predicts Edmonton's market will struggle due to weak demand from lacklustre economic growth, in large part because of the pandemic.
“What we've seen in the last four months is not really indicative of the underlying demographic demand,” says Peter Norman, chief economist with Altus Group.
The pent-up demand activity in the Edmonton market helped buoy sales year to date after the pandemic largely froze activity in the second quarter, he says.
That pause also slowed new homes starts, the report states. Altus further points to reduced MLS (Multiple Listing Service) sales in Edmonton, which were down three per cent after the first nine months of 2020, compared with the same span last year (13,300 units compared with 12,900).
But supply also fell over that nine-month period, with months of inventory dropping to 3.9 from 6.2 last year.
That's helped stabilize prices on the resale side, as the average price of a home grew by 0.6 per cent over the previous year. New home prices, however, fell by 1.2 per cent on average in part due to over-supply of condominiums.
Norman says the market's momentum through summer and fall will likely slow as the second wave of the pandemic dampens buyer enthusiasm despite low interest rates. As well, Alberta markets have the additional economic headwind of a long-running slump in its largest industry, oil and gas.
“So you've got this severe pent up demand from the second quarter when it was very difficult for sales, and then in the summer there was at least some sense of normalcy returning.”
But the big demand driver for housing is jobs growth, he adds,
which has been challenged and will remain so for much of 2021.
What's more, slow economic activity hampers interprovincial and international migration growth.
“In the second quarter in Alberta net international migration fell 96 per cent,” Norman says. In fact, migration turned negative — the province lost more people than it gained — for the first time since the 1990s.
That's one key reason for the report's forecast of slowing housing demand and, in turn, falling homes starts in 2021. Norman
adds most of the pain will be felt in the multi-family condominium segment.
One reason for ongoing slow condo demand is that the segment typically serves first-time buyers or investors seeking to rent units. And condo tenants tend to skew to lower income brackets, which have generally been affected more negatively by the pandemic.
“It's really a case of that K-shaped recovery everyone has talked about,” Norman adds.
“Many households across the country … have thrived or bounced
back quickly, and then there are other households that would have been devastated without government supports.”
And they have yet to recover, he further notes.
Edmonton realtor Beverley Hasinoff with Liv Real Estate says condominium demand has been noticeably weaker than other parts of the market this year.
In contrast sales for single-family homes, particularly those in the more affordable range, have been booming since spring.
“Homes in the $300,000 to
$400,000 price range are still the strongest segment of the market,” she says.
More generally, the fall market has been balanced between buyer demand and supply even as listings have increased.
“Economic pressures may lead to a decrease in demand for housing so, if listings continue to be above average, we may see a shift in the market.”
It's really wait and see at this point, Hasinoff adds. “The numbers over the next couple of months will set the tone.”