Edmonton sees growth in population, disposable income, new housing inventory: CMHC

Single family homes and high-density complexes exist side-by-side in the southwest Edmonton communities of Ambleside and Windermere. May 3, 2018. Vinesh Pratap, Global News

The gap between supply and demand continues to widen in Edmonton real estate, according to the Canadian Mortgage and Housing Corporation (CMHC), further reinforcing a buyer’s market.

But population growth and modest increases in personal disposable income are helping offset the sales slump.

On Thursday, the CMHC released its quarterly housing market assessments for Canada and 15 cities across the country.

Nation-wide, Canada’s real estate market has come out of 10 consecutive quarters of being highly vulnerable. That two-and-a-half-year run of high vulnerability was due to a combination of overheating, price acceleration and overvaluation in major cities in B.C. and Ontario, and overbuilding in the Prairies.

Edmonton remains at a moderate degree of housing vulnerability due to overbuilding that shows no signs of abating.

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“Overall, the number of new completions coming into the market is outpacing demand,” CMHC senior analyst James Cuddy said. “This is resulting in higher levels of inventory.”

“It was really the same story except for the past few months, where we saw apartment inventories coming down, but all other segments rising. In the last couple months, that story has changed, where apartment inventories are rising again, and this is because new supply is outpacing demand.”

Alberta’s ongoing economic recovery after the 2014 oil price crash and recession has been the persistent challenge for Edmonton’s real estate market.

Edmonton also has some of the highest levels of single- and semi-detached new home inventory in Alberta. When combining those types of inventory from Alberta’s seven-largest real estate markets with a population of 50,000 or more, 61 per cent are in Edmonton.

“The inventory levels, in terms of (detached homes) in Edmonton, is quite high,” Cuddy told Global News. “It’s the highest it’s ever been and it has grown quite a bit recently.”

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There are signs for hope in Edmonton’s real estate market.

“There are some positive signs in the market,” Cuddy said. “We have seen some population growth and some modest income growth in the last quarter. This has helped demand, in the sense of moving individuals into home ownership.”

But those factors haven’t been enough to turn the downward trends around.

“The economic fundamentals in the market right now are facing some challenges. We have high unemployment in both Calgary and Edmonton. The real personal disposable income growth isn’t where it was pre-recession. These are impacting demand and are one of the key factors in the continued elevated inventory levels.

“When we have this disconnect between supply and demand, it puts downward pressure on prices.

The (housing market assessment) is looking at new housing in terms of these inventories, but the same story goes for the resale market.

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“There are a lot of listings in the resale markets while the demand isn’t necessarily at the same levels, so this is contributing to lower price growth over time.”

Cuddy also said the mortgage stress test — designed to target over-leveraged house buyers — has impacted some buyers.

“Whether or not it means they simply shifted to a lower price point or if they had to rent for longer, that could have impacted demand,” Cuddy said.

“The challenge is it’s difficult to tease out these effects at the local level, especially in an environment when there are so many other things going on that are arguably more important, such as the economic fundamentals in the market like high unemployment rates, lack of growth in personal disposable income and high interest rates.”

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