'We're still a very affordable market in Canada to own and to have money left over at the end of the day'
Like a lot of young homeowners, Terra Belanger and her fiancé wanted to step up in the real estate market.
The couple had been in their current home for eight years, but wanted a bigger yard for their dog and a quieter neighbourhood. They had saved hard — even living in a relative's basement for two years while renting out their home — and felt capable of affording a new place.
In April, they'll move to Edgemont, a residential neighbourhood in southwest Edmonton, just outside the Henday. They've struggled to sell their old home but are finally close to a deal.
"[Edgemont] is full of trees and we like that, how it feels like you're in nature. And there's a walkway that goes right into the ravine," says the 27-year-old Belanger.
The couple's story is in many ways representative of both the long-term — and short-term — trends in Edmonton's real estate market.
The growth in single-family homes is overwhelmingly in far-reaching suburbs, where land is more affordable for families who want new, modern houses.
And the market has seen the price of a single-family home rise by about three per cent in five years. The gains are small, steady — and entirely expected considering the ongoing slump in oil prices that has affected all of Alberta.
Steady growth. Affordable prices. Few big surprises.
Edmonton's real estate market is a far cry from the red-hot, almost incomprehensible markets of Toronto and Vancouver. With the exception of a few dramatic blips — such as nose-diving prices in the early 1980s and skyrocketing prices in 2005 — the pace has been steady for decades.
Look around Edmonton today and it's a whirl of activity: high-rises under construction downtown, new homes being built in the suburbs and fancy infill edging out the bungalows in neighbourhoods like Bonnie Doon and Westmount.
"We're still a very affordable market in Canada to own and to have money left over at the end of the day," says Robert McLeod, a real estate broker and founder of McLeod Project Marketing. "Edmonton has always been an affordable market."
Calm, with occasional blasts of turbulence
Ask anyone about Alberta real estate in the early 1980s and they'll use one word to describe the time: crazy.
Mill Woods was considered the southernmost edge of the city, where home foundations were being dug into fresh soil. Interest rates had skyrocketed, prices had slumped and some people were offering to sell their homes for a dollar just to walk away from their bank commitments.
The market eventually stabilized, and the feeling of frenzy didn't show its face again until about 2005. That's when an oil boom fuelled a population boom, with many people moving to the region in search of big salaries.
"The market hadn't moved since the early '80s. There was 25 years of stagnant growth and — all of a sudden — you had a market on fire, huge population growth. Everyone wanted in and the real estate in Edmonton was dirt cheap," says McLeod.
"To create that perfect storm again you would need decades of stagnant growth and then a massive kick into the economy," he adds. "I feel now we're going into a new world where our market will be more balanced in Alberta.”
Big projects that don't get off the ground
Where balance sometimes hurts the real estate market is when developers are trying to launch a large-scale project. Several notable projects in the city have failed to achieve their anticipated lift-offs.
More than a decade ago, developers promised to build an urban village around the new Century Park LRT station. But the plan repeatedly stalled and the developers have had to revamp the original plan. Only a fraction of the originally planned units have been built.
In Glenora, a project to develop condo towers at the edge of the highly desirable neighbourhood is finally starting to take shape after sitting abandoned for years.
On the other side of downtown, a giant hole at 95th Street and Jasper Avenue marks the spot where a tower, one day, is supposed to be erected.
McLeod says part of the problem is demographics — people stream into the city during boom times but population growth tapers off when the economy slows down. That can affect sales and financing.
At the same time, he says, the consumer in Edmonton "wants to see and touch the product." This makes pre-sales on large projects harder to achieve, which can also affect financing.
McLeod says that approach is starting to change as investors from other cities look at Edmonton. But that money tends to attach itself to higher end products, where investors are more likely to park their cash.
The problem: downtown commercial real estate
If there's one big red flag in the Edmonton real estate market, it is downtown commercial space, where offices have been emptying since the economic downturn.
According to a report by commercial real estate firm Avison Young, the downtown office vacancy rate was 17.2 per cent at the end October 2017, up from 13.1 per cent the year before.
The Edmonton Economic Development Corp. says that vacancy rate is expected to rise to 30 per cent in 2020.
Part of the problem is a boom of brand-new downtown office towers, including the Edmonton Tower, Enbridge Centre and the Stantec Tower.
"That's more space than we've ever seen added in Edmonton," says David Dale-Johnson, the Stan Melton executive professor in real estate at the University of Alberta.
"They're all doing well because they attracted tenants from everywhere else. It's the old buildings from where they came that are suffering."
But Dale-Johnson says the "B" and "C" class office buildings will now have the chance to be re-priced or transformed into something entirely new.
"The big challenge is there's going to be a few years of figuring out how to deal with those buildings."
Rules, rules, rules
Nick Ross, 25, bought his first home last year. It's a two-bedroom, downtown Edmonton condominium that he renovated with help from his father.
After landing a communications job with a home building company, crunching the numbers and securing some help from his family, Ross decided he'd rather be an owner than a renter.
Like a lot of young people, he was drawn to the downtown area for the energy and lifestyle. But there was one more reason that he bought a condo instead of a house.
"I couldn't afford a house."
Ross closed the deal on his condo several months before new mortgage rules came into effect in January, requiring all buyers to prove they can handle significantly higher interest rates.
The "stress test" applies to every buyer, whether or not they have a 20-per-cent down payment.
Ross says the rule would have made it harder — though probably not impossible — for him to purchase the condo.
The stress test is expected to have the biggest impact on first-time home buyers who don't have equity built up in a house. Like Ross, those buyers are increasingly looking at condos, townhouses and duplexes as their first home purchases.
Realtors say the negative effects of the stress test could be counter-balanced by a slowly rebounding Alberta economy. Condominium sales in January were up 14 per cent over the previous year, although prices had dropped by seven per cent since 2017.
It remains to be seen what the long-term effect will be. But it's a reminder that Edmonton's market is also shaped by policies made at different levels of government.
The future looks hopeful
Abe Hering, a long-time residential real estate agent in Edmonton, says council's 2015 decision to allow any lot that is at least 50 feet wide to be split into two, has had a tremendous impact on the market. Lot-splitting allows for development of "skinny" infill homes.
"Lot-splitting is happening in every single community in the city," says Hering.
He says his own neighbours include a couple who have owned their house for 50 years and a woman who has owned hers for 30.
"A young couple isn't coming to buy my neighbour's house. It's old and needs to be re-done and potentially bulldozed," Hering says. "Young couples want a brand-new structure ... that can house their families and can give them the amenities of today."
While infill housing is more expensive than homes in the city's far-flung suburbs, Hering thinks that overall Edmonton is an affordable city for working people.
"I think Edmonton is still capable of housing and providing single family homes to young families. Our prices are not astronomical," he says.
"I can take a young couple who both work and if they save for two or three years I can sell them a single-family home in Edmonton …. It's not beyond their horizon."
Original article from CBC.ca
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