Real estate will perk up in 2018, reports predict

Backlog of unsold new homes drops, while commercial sector slowly improves

Two reports on Edmonton’s residential and commercial property industry are painting a rosier picture of the market next year.

The city’s backlog of unsold new suburban homes is down from last winter and the market could start to tighten in 2018, figures from a real estate consulting firm show.

There was slightly less than two years’ worth of housing available in new subdivisions over the summer, a drop from the 2.3-year oversupply on hand at the beginning of the year, according to data Intelligence House released Tuesday.

“That’s put the market in a (balance) … In my opinion, balanced markets are always good. We don’t want an oversupplied market that hurts the builders or skyrocketing markets that hurt consumers,” company owner and partner Alex Ruffini said in an interview.

“That means if you really want to buy that kind of product, you still have options.”

As in so much with real estate, location is key. Home supplies are considered relatively high in Edmonton’s northwest, northeast and west sectors, but with only 1.28 years of supply the popular south sector is constrained.

There were 8,358 vacant lots available in the third quarter of the year, compared to 9,687 lots for the same period in 2016.

The number of pre-sales and purchases of speculative homes built before they were sold dropped to 3,282 in the peak spring-summer residential sales season from 3,486 during the 2016 peak season, but Ruffini said 90 per cent of customers chose places where they could move in soon.

“Move-in ready homes are more expensive. You get a pretty good deal on a pre-sale that’s 10, 12 months away (from possession) because you have to wait.”

Although he predicts things will tighten up in 2018, he doesn’t expect Edmonton will return to boom-time property values.

“I see an even more balanced market, potentially some areas being undersupplied because of the lack of inventory. I see activity going up and prices going up in a modest way, five per cent tops, which I believe is pretty good for the industry.”

In a separate report, ReMax Commercial anticipates Edmonton will also have a healthy commercial property business next year.

Sales of retail, office and industrial sites were up 39 per cent in the first half of 2017 compared to 2016, topping $1 billion for the first time in three years, the report states.

The vacancy rate for retail properties is five per cent and sales in the first half were up strongly from 2016, more than doubling to $332 million from $159 million.

“Edmonton’s commercial property market is expected to continue to slowly recover, leading to cautious optimism amongst investors,” the report says.

“(Increased economic activity and population) are all positive indicators of a healthy commercial property market heading into 2018.”