Last week (January 4th, 2017) the Edmonton Real Estate Association held their annual forecast. With speakers including Christina ButchartSenior Market Analyst CMHC, Catherine RothrockChief Economist Government of Alberta, and John RoseCity of Edmonton Chief Economist. This is the annual review of the previous year’s real estate market for Edmonton and surrounding areas, and a summary of what these local economists are forecasting for the upcoming year.
For the most part all presenters agreed with what we can expect for 2017. Modest growth and recovery, with a splash of uncertainty.
Some main points from James Mabey; Chair, REALTORS® Association of Edmonton:
Single-family home sales were down 5.4% in 2016 compared to 2015 and a 1.7% decrease is predicted for 2017. Despite predicting a drop in average prices last year, the average single-family home price dipped only 0.6% in 2016 which was in part due to 10 sales over $2million in 2016 that helped keep the average prices high. Single family prices expected to drop 2.2% in 2017.
Condos were down 14% year over year in 2016.
A further decline of Mortgage rates expected to have minimal impact in 2017.
Condo sales are expected to remain stable in 2017.
Total residential sales are expected to decrease about 1% in 2017.
Single family home sales hot spots were Summerside, Windermere and The Hamptons in Edmonton in 2016..
In recent years, the number of apartment style condos that have sold has dropped from 10% of overall sales to 6%, and rowhouse/duplexes increased from 6% to 10%.
Inventory spiked last year, coming close to the levels we saw at the end of 2008.
Hot spots in Edmonton in 2016: Ottewell, Cumberland, Grandin and Foxboro all saw average days on market below 40 days in 2016. Condo hotspots included Centennial Village in Sherwood Park, Garneau, South Terwillegar and Casselman with the average days on market at 48 days or less.
Risks to these predictions include: mortgage rates and rules, oil prices, employment, migration and consumer confidence.
The second speaker was Christina Butchart; Senior Market Analyst with CMHC. Some of the main points from her presentation, include:
Edmonton lost jobs for 5 consecutive months in Q2 and Q3 in 2016.
Employment is expected to continue to pull back a bit in 2017, with the economy strengthening in the second half of the year.
Our labour force grew in the first half of 2016 but it has been pulling back since about June. Some people have left for other markets, bringing the unemployment rate down below 7% by the end of the year.
Population growth is expected to slow over the next few years, but it will remain positive.
Expected to stay relatively low over the next 5 years.
New construction of rental properties has really increased over the past few years, and as a result the number of properties available for rent has increased and the vacancy rate (7.1%) is at the highest rate we’ve seen since 1996. The number of people who rented in 2016 increased, but supply increased faster. Vacancy rates to remain around 7% in 2017 and drop below 6% in 2018. Rental rates declined for the first time in 2016 since the mid-90’s (average rents dropped about 3%).
New starts pulled back quite quickly in 2015 & 2016.
There has been a slight pick-up in construction in Q4 of 2016.
Inventory of new homes peaked in mid-2016 at around 900 homes and is dropping (it sits at about 600 homes now).
Starts should get back up to about the 2015 level in 2018.
Multi-family starts hit a record high 2015 and the market pulled back in 2016, but levels are still relatively high. As a result, inventory has continued to grow. Starts are expected to remain lower for the next few years.
Overall CMHC says our market is moderately overvalued, which essentially means they’re keeping an eye on it. This could be corrected by declining prices, or stronger economic fundamentals.
Thirdly, Catherine Rothrock; Chief Economist for the Government of Alberta spoke. Some of her main points, include:
Interest rates to stay low for 2017.
Oil and commodity prices slowed. Don’t expect to rebound quite to where they were before correction.
Not expecting big change to Canadian dollar.
Largest correction since early 80’s. Both in amount and duration.
Expected downward pressure over next few years keeping prices relatively the same.
Production has picked up due to projects that have started over last few years.
Over 500,000 barrels of new production over the next few years.
Don’t expect to see investment go back to 2014 levels for oilsands. Not much growth. Mostly maintaining current projects and rapping them up.
Signs of stabilization. Bottomed out. Declines to ease. Pick up in exports. All positive heading in to 2017.
Slower commercial/industrial construction.
Government to continue infrastructure.
Employment stayed resilient. Some gains over last few months. Employment rate increased mostly due to migration. 7.5% still high for Albera.
People come to work, not retire. When work slows, people leave. Forecasting 11000 interprovincial outflows.
Still strong inflows of immigrants. Why employment rate higher.
Correction in household earnings.
Declines in big purchases (cars, furniture etc..)
There has not been a significant correction for home prices because pre-recession we did not see a significant build-up in prices. Did not expect to see a large correction.
Rental market taking a lot of the brunt as many workers owned homes in other provinces and rented here.
Expect a return to growth. Domestic demand still weak. Driven by exports. Improvement in manufacturing.
Oil price not to change much by mid 2017. May see some improvements, but could see production from U.S producers.
“Trump Factor” – she is optimistic. Does not feel trumps policies to changes things too much.
Real GDP Growth expected to improve slightly in Canada in 2017 to about 2% from about 1% in ’15 and ’16.
Canadian $ is expected to stay between 75-78 cents (US) for the next few years. Commodity prices are expected to remain subdued.
Oil prices are expected to remain relatively low through 2018 and so investment in Alberta oil is not expected to grow. Production has actually increased in the Province and is expected to continue to increase.
There are signs of stabilization for the Alberta economy – business output has been improving, as have exports.
Government spending has partially offset declines in private spending.
Big projects are wrapping up and construction is declining. Employment rate is expected to remain high in Alberta for a couple of years.
Expecting a net inter-provincial loss of 11,000 people in the province in 2017, but international migration is expected to offset that loss.
Average weekly earnings have been on the decline since mid-2015, which has caused a pull back in spending in the province.
Part of the reason housing market hasn’t seen as large of a correction as some might expect, is because we didn’t have a large increase in prices between ’09-’14, when supply mostly met demand.
Improvements are expected in manufacturing and exports in 2017, but they’re not expecting strong GDP growth (about 1% mostly due to construction in Fort McMurray).
Any recovery is going to take “a while.” Alberta’s annual nominal GDP per capita is still the highest in Canada, and there are some positive signs expected to support growth in the next five years – costs have come down, and we have positives demographics (our population is about 10 years younger than the Canadian average).
There is a lot of volatility in the oil market, people are uncertain about OPEC and other producers – there may be some improvements in prices, but then production should increase putting a lid on any price increases in 2017.
And lastly, John Rose City of Edmonton Chief Economist, says:
First half of 2017 employment rate to jump from 6.8 to 7.5 due to the fact that new jobs come up and people move back to the labour market. But really means employment growth and not to panic.
Modest growth in 2017.
Employment rates going up for the “right reason.” People perceiving opportunity and moving back to the province.
Canadian dollar in low 70’s and will help exports.
In short, slow and steady for 2017! All three economists agreed that as we are not likely to see any further decline moving forward in 2017, we have a long way to go. Slow, modest growth is expected in 2017. We'll take it!
For home buyers, 2017 will be rich with opportunity due to higher levels of inventory to choose from, less competition, and continued low interest rates. It is still more important than ever to educate yourself as much as possible before purchasing a home. Make sure you know the area, recent sales activity, and choose an experienced realtor who knows your preferred area. Take your time, but keep in mind that homes in good areas that are priced well are still moving fast, and that getting a "good deal" isn't necessarily negotiating the price down. Do your homework and buy smart!
If selling in 2017, it is more important than ever to hire an experienced real estate professional who is knowledgeable in your area. The marketing plan is more imperative than ever and exposure is key. Your home has to present at its absolute best right out of the gate. Buyers are picking up on the smallest of issues and have the luxury of choice. It is very much becoming a beauty contest, and you want to make sure you are the winner! Lastly, you need to make sure you are priced correctly right up front. This is not the market to test the waters with an over-priced home.
Happy buying and selling in 2017!
~ Corey Sylvester, Realtor®
(information gathered from Edmonton Real Estate Association 2017 Forecast and EdmontonRealEstateBlog.com)