Edmonton Second in Canadian Metro Economic Activity Index Rankings: CIBC
CIBC ranks Canadian cities for economic growth and today announced Toronto leads the country with Edmonton coming in a close second place. Toronto lead the country for the second year in a row, showing the fastest economic momentum with strong population growth, employment and housing starts.
Edmonton ranked second in CIBC's measure or economic momentum, up from 11th in the 2011 Q1 report. The ranking reflects the city's strong labour market with overall employment rising by almost eight per cent year-over-year in the third quarter—the fastest pace among all of Canada's top cities. "The city also enjoyed one of the lowest unemployment rates in the nation (5.7 per cent as of the third quarter of 2011) while the quality of employment is relatively elevated (ranked 4th among all cities)," notes Deputy Chief Economist Benjamin Tal.
"As well, Edmonton's population is now rising by a year-over-year rate of 1.7 per cent—well above the national average, while the numbers of consumer and business bankruptcies are among the lowest in the nation."
CIBC Metropolitan Economic Activity Index (2011 Q3)
Rank CMA 3Q Moving Average
1. Toronto 23.0
2. Edmonton 20.0
3. Kitchener 18.0
4. Halifax 16.8
5. Vancouver 15.5
6. Ottawa 15.2
7. Montréal 14.9
8. Regina 13.8
9. Calgary 13.1
10. Trois-Rivières 11.7
11. Québec City 11.5
12. Winnipeg 11.1
13. St. John's 11.0
14. Hamilton 10.7
15. Sherbrooke 9.5
16. Kingston 7.5
17. Saint John 7.1
18. Sudbury 6.7
19. Saskatoon 6.4
20. Victoria 5.9
21. St. Catharines-Niagara 5.6
22. London 5.2
23. Windsor 0.4
24. Saguenay -1.8
25. Thunder Bay -3.4
Average of 25 CMAs 10.2
About the CIBC Metropolitan Economic Activity Index
Using 9 key macroeconomic variables, CIBC's metropolitan index of economic activity is structured in a way that approximates the change in each city's level of economic activity. With data going back in history, the index monitors not only the current performance of a given city but also tracks its cyclical behaviour against the national economy and other census metropolitan areas (CMAs). The focus is on the 25 largest CMAs in Canada.
The macro variables used to develop the index are:
Population growth; Employment growth; Unemployment rate; Full-time share in total employment; Personal bankruptcy rate; Business bankruptcy rate; Housing starts; MLS Housing resales; and Non-Residential building permits. The complete CIBC World Markets report is available at: http://research.cibcwm.com/economic_public/download/metro_monitor.pdf
Greater Edmonton’s Real Estate Market Steady In December
Residential real estate sales were right in the normal range in the greater Edmonton area in December. There were 878* residential sales compared to 784 last December and 1133 last month. We certainly noticed higher than normal activity on our listings with many showings over the holiday season. So it feels like 2012 will start off strong in the sales department, but you never really know...
Edmonton MLS® sales
The average sale price for residential homes on the MLS® system was $316,415 compared to $308k last December (up 1.7%) and $321 last month. The median sale price was $303k compared to $300k last year and $310 last month.
“With economic uncertainty impacting Europe and depressed housing markets in parts of the United States, it is a relief to report on the stability and health of the local real estate market,” said REALTORS® Association of Edmonton President (2011) Chris Mooney. “With prices and sales varying within a small range there is a solid base going forward into the 2012 market.”
Edmonton average real estate sale price
The inventory dropped to 5316 at the end of December which is in the "new" normal range (in the past this would have been considered quite high, but when you include the past few years it is in the normal range):
Edmonton MLS® Inventory
The number of new listings also followed a seasonal pattern, dropping to 1088 in December; the number of new listings coming on the market should increase quite a bit over the next few weeks:
Edmonton MLS® Listings
Our annual report on the Edmonton real estate market will be sent to our clients and subscribers in the very near future - don't miss out, subscribe for free today.
*We adjust the residential sales total for the current month to account for unreported sales. Every month 6% of sales on average are not reported to the Association in time for the monthly report. The following month the numbers are updated to reflect the total sales during the previous month. That means the current month always looks worse compared to previous months. For example, in October 2011 the reported sales totalled 1170 which we adjusted to 1240 for comparison purposes and the actual number fo sales were 1253. In November there were 1084 reported sales which we adjusted to 1149 and the actual number was 1133. So far our adjusted numbers have been far closer to the actual numbers than those reported by the Association each month (so far on average I am off by 1 sale whereas the association is under reporting by 77 sales on average each month).
Is Alberta Headed for Another Boom?
Personally, I prefer slow and steady growth, but there are many suggesting our province is headed for another boom. The Edmonton Journal published an article yesterday with some interesting information called: "Energy Revival Fuelling Another Alberta Boom." Highlights include:
- The Royal Bank predicts Alberta's rate of growth will outpace all provinces except Saskatchewan this year and next.
- The private sector was the source of 116,000 new jobs this year
- The oilpatch and natural resources sector is set to lead the nation with the highest project salary increases next year
- Labour shortages are expected
- Retail sales rose more in Alberta than any other province last month
Labour shortages and inflation could be a major problem in the province. It's certainly tough to look at all this information and not think of other factors that will certainly affect our economy, like the global financial situation and rising interest rates. On the other hand, when I hear from the Edmonton Economic Development Corporation that there are $17billion worth of new projects set to start between here and Red Deer it's tough not to consider it. At the end of the article the author suggests perhaps a "mini-boom" is more likely and that seems much more feasible to me.
Vacancy Rates Decline in Edmonton
CMHC released their bi-annual report on the rental market in Edmonton yesterday showing decreasing vacancy rates and increasing rents. Increased net migration and job creation explain the changes to the rental market. The vacancy rate dropped from 4.2% in October 2010 to 3.3% in 2011.
Edmonton Vacancy Rates, Source: CMHC
The average monthly rent for a 2-bedroom apartment increased to $1,034 from $1,015 in October 2010. Edmonton rental rates were amongst the highest in Canada behind Vancouver, Toronto, Ottawa, Calgary ($1,084) and Victoria.
Edmonton rental rates, Source: CMHC
Bachelor suites reported the lowest vacancy rate at 2.7%. The area with the lowest vacancy rate this fall was St. Albert, at 0.5%, other relatively tight markets included the South West and Leduc, both at 1.2%. The University and Millwoods zones were also showing a low vacancy rate of 1.3%.
Edmonton rental market by area, Source: CM
With vacancy rates moving lower across the Edmonton region, fewer
landlords are offering incentives to lure new tenants and reduce turnovers - 25% of landlords offered incentives last October compared to 10% this year. This represents the lowest level since October 2008. Even though rents increased in the past year, affordability increased as well, since renter income grew at a faster rate than rents.
Apartment vacancy rates across Greater Edmonton decreased in 2011 thanks to improved demand associated with the growing economy and further reductions are expected in the coming year as the economy continues to expand. Supply of new rental units will not keep pace with the expected rise in demand in 2012. Improving employment, particularly among the younger age groups, will encourage more newcomers to the region. Rental rates will continue to rise in the months ahead. A typical two-bedroom unit will rent for close to $1,060 by the fall of 2012.
I love Yegdt: downtown x-posed
I frequently get asked what’s happening downtown, especially with the ARENA buzz. What will prices do? What areas will be most affected? I get asked this at industry functions outside of Edmonton on a regular basis as well. I get these questions at the Y in the change room, at Yoga, at Starbucks and so on. This level of buzz around the downtown is certainly warranted given the possibilities. A number of our clients have asked questions on their specific interests downtown as well.
Most of the time my answers have been very general with the acknowledgement that I don’t have intimate knowledge of what is going on downtown. I do believe that the people who have good solid information can take advantage of the opportunities that might arise. So, if you are interested in the answers then this is where you want to be on December 15th, 2011 from 7:30am to 3:30pm: www.Edmonton.com/downtown.
This information session on downtown hosted by Economic development Edmonton is where we will be to get the answers to our questions. See you there.
Edmonton Area Condo Builders Get Busy in October
According to a press release from CMHC, condo builders are ramping up production in Edmonton. Edmonton area builders started almost three times as many new condos in October this year as they did last year. There were 786 multi-family units started in October, compared to 271 last year (most of these were apartment style - 550 units were started compared to 100 last year).
Meanwhile, single family home starts were down 44% from last year (builders started 464 homes).
“Adequate new and resale single detached inventories have subdued production levels throughout much of this year,” noted Richard Goatcher,
CMHC’s Senior Market Analyst for Edmonton.
Interesting that there is so much new construction of condos while average condo prices are dropping in Edmonton and single family homes are holding strong. My guess is that the builders are looking at the growing population in Alberta and thinking many of these new residents will want to purchase condos in the new year.
New Home Upgrades Worth Paying For, Part 4: Lot features
Vacant lot
There are 5 main factors that affect the value of your home: location, the home itself, the market conditions, your pricing strategy, and how well its marketed. Of course, the most important factor is location, and this means the lot itself, the neighbourhood, the city and the province. What can be tricky is deciding if a "premium" lot offered by the builder is actually worth the extra cost, and if it will improve your value when the time comes to sell.
Pie lot:
Most pie shaped lots are definitely worth the premium price - you get way more space than your neighbours, and more space between yourself and your neighbours. One downside is there tends to be less space for visitors to park, and there is generally not enough space between driveways for street parking. Another benefit though is that you have very little sidewalk to shovel in the winter. On the other hand, a reverse pie lot (where your front yard is wider than your back yard) is typically less desirable than a regular rectangular lot.
Lot orientation:
Most people prefer a lot where the back yard faces south, west or somewhere in between. This means you get the sun in your back yard for most of the day. You often seen owners of homes that have back yards facing north or east sitting in their front yards or driveways in the afternoons - a friend of mine calls them "garage people."
Green space:
A lot that backs onto green space is almost always worth a premium price. You have much more privacy, since your neighbours are so much further away. However, not all green spaces are created equal. Make sure you look into the restrictive covenants with regards to fences; some neighbourhoods require that the fencing along a green space be chain link. If you're on a fairly narrow green space with chain link fences, you actually end up with less privacy than you would backing onto other homes with a wooden fence. Siding onto green space gives you a little more space between you and your next door neighbour, but there will be foot traffic along the whole length of your lot
Corner lot:
Corner lots have to be assessed on a case by case basis as they can be more or less valuable depending on the situation. If you're on a corner lot siding onto a busy street it's less valuable. A definite downside to corner lots is sidewalk maintenance - in most cases you will have 3-4 times as much shovelling to do in the winter as your neighbours have to do on rectangular lots. However, in some cases the sidewalk along the side of your home is maintained by the city. So a corner lot, on a quiet street, with city maintenance can be quite valuable. In a city where it snows for half the year, shovelling is a major consideration for most home owners.
Walk out lot:
In general, a walk out lot has more value than a regular lot, but as in all cases there are some better than others. It is particularly important to find out what you back onto with a walk out lot: if you back onto a busy street or other homes your walk out home becomes a giant fishbowl towering over the neighbours for everyone to look in on. A severe slope can be less attractive to families, since kids will have to go down lots of stairs from the deck in order to play in the back yard (plus its harder to see them down there from inside the home). A shallow slope can lead what Sheldon calls an "alligator pit" where your walk out area is actually below grade - excellent landscaping is particularly important in this case.
Restrictive covenants:
No one likes to be restricted from doing what they want to do, but restrictions are generally a good thing when it comes to neighbourhoods. When you drive through a neighbourhood with no restrictions you get homes and fences in every shape, form colour and style under the sun. It usually ends up looking like a big mess. In general the more expensive the neighbourhood, the more restrictions you will find. Typical restrictions include the type and colour fencing, quality/type of exterior building materials, number and size of out buildings (garages, sheds etc), percent of coverage (how much space the home can take up on the lot), minimum number of trees, set backs, and height restrictions.
Power lines:
Whether you believe there are negative effects from living near power lines or not, your lot value will be lower if you're visibly close to large power lines. Perception is reality in real estate, and if power lines are the first thing a buyer sees when you're driving up to the home they will instantly discount it, if not take it off their list. The interesting thing is being just one block away can make all the difference in the world - the phrase "out of sight, out of mind" is really true in real estate.
So the most valuable lot in a subdivision would be a walk out pie lot, backing onto green space where the back yard faces south west and no power lines are visible.
Condo Act Changes Coming in Alberta
This weekend the Alberta chapter of CCI (Canadian Condominium Institute) had a conference here in Edmonton. While Sara was one of the presenters and presented on real estate trends I got the chance to sit in on some other presentations.
I often hear complaints from condo owners that are not involved in their condo associations and I realized at the conference just how many of these people are volunteers. They give up their own time and talent and take on many of the problems that must be faced with very little credit.
When I started selling real estate a few years back (1988) condos made up about 5% of the market in terms of sales. According to the REALTORS® Association of Edmonton they now make up about 28% of the market, and at one point (2007) made up 35% of the market.
Anyway, without further delay, the key thing I took away is that the condo act is currently undergoing an extensive review for the first time since 2000. If adopted, some of the proposed changes are going to be SIGNIFICANT. Service Alberta will be putting out a discussion paper that is definitely worth reviewing for anyone who has a stake in condominium living. Some of things in that discussion paper are as follows:
- Denying the right to vote. There will be clarification as to what level of arrears would enable a board the ability to deny an owner the right to vote.
- Provisions could be made for video and teleconference for board meetings.
- Possibly extending the insurance policy of the condo corp to include improvements in the individual units
- Possibly looking at licensing condo managers. About time! Most people are under the impression that if they use a property manager who is regulated by RECA that they are in fact using a licensed firm. RECA however does not regulate condominium management activities and therefore, even if they are licensed with RECA they do not have to follow property management requirements as set out by RECA. This is a very sketchy area as most condo boards have found out.
- Condo documents should belong to the board. I definitely did not know this one. The documents and financials are the property of the board. A very reliable source with the REALTORS® Association of Edmonton and the president of his condo corp indicated to us that when the let their management company go that they could not get their documents back. That just seems absurd to me but welcome to condominium management.
- Providing an alternate dispute mechanism for settling disputes instead of going through the courts which can be extremely pricey.
These are just a few of the major changes that are being contemplated in the condo act in Alberta, and you will have a chance to voice your concerns and comments as well when they release the discussion paper.
Edmonton Real Estate Market Improves in May
I would love to give you an explanation for what's happend with real estate sales in Edmonton, but I just don't have one. Last month we had the fewest sales we'd seen in April in years, and this month we saw a big jump in sales and the first month with more sales than last year. Back in March I predicted that we would see more sales than last year in May or June, and I have to admit I was a little nervous about that prediction last month, but it appears to have worked out as I predicted. We'll have to wait and see if the second half of my prediction comes true (that prices would be higher than last year by August or September).
“There is a wide range of property on the market right now but it is turning over quicker than in recent months,” said REALTORS® Association of Edmonton President Chris Mooney. “The local economy is picking up, the demand for labour is increasing but the national situation is keeping interest rates low. We anticipate increasing prices and sales through the summer ahead as we originally forecast.”
Edmonton real estate sales
The average sale price did increase slightly in May to $331,974 from $327k in April but was down 2.4% from last May. The median followed suit up $2500 from last month to $317,500 but down from $321,500 last May.
Average real estate prices in Edmonton
The number of new listings continued to increase in May, and based on the activity we are seeing in our office I wouldn't be surprised if this continued in June.
Edmonton real estate listings
The inventory also increased in May, but is still below the levels we saw last year:
Edmonton real estate listing inventory
I received a question about what phase of the sales cycle we are in - if you remember a few months ago I introduced the idea of a sales cycle as a way of predicting what prices are going to do. If sales are increasing on a year over year basis, prices will follow, if they are decreasing, prices will flatline and then start to fall:
Sales Cycle
So, after a number of months at the bottom of the cycle (phase 5) with lower sales and average prices, we have moved into phase 7 - higher sales but lower average prices:
Edmonton: Most Affordable Major City in Canada
Unlike most other major centres across Canada, housing affordability in Alberta remained stable in the first quarter of 2011, according to the latest Housing Trends and Affordability report issued by RBC Economics Research.
RBC's housing affordability measure in Canada's largest cities is as follows: Vancouver 72.1%, Toronto 47.5%, Montreal 43.1%, Ottawa 39.0%, Calgary 35.9% and Edmonton 31.5%. That means it taks 31.5% of monthly income in Edmonton to own an average detached bungalow, including taxes, utilities and mortgage payments. Meanwhile in Vancouver it would eat up 72.1% of your monthly income.
"The Alberta market continued to be stuck in low gear in the first quarter of 2011. Sales of existing homes and construction of new housing units showed very modest increases," said Robert Hogue, senior economist, RBC. "While market conditions have become more balanced in recent months, owning a home doesn't seem to be getting more expensive in the provincial market at this stage. Affordability levels are still looking quite attractive."
RBC's housing affordability measures remained relatively unchanged, and below their long-term averages in the first quarter of 2011 in Alberta. The measure for the benchmark detached bungalow in the province moved up to 31.3% (an increase of 0.4% from the previous quarter), the standard condominium stayed flat at 20.2% and the standard two-storey home fell to 34.2% (down by 0.2 of a percentage point).
RBC's report notes that there are signs that the Calgary housing market is finally overcoming its protracted slump. "Calgary home prices have yet to break out of their listless trends, but they rose at their fastest rate in more than a year in the first quarter, with detached bungalows leading the way," said Hogue. "Firmer market conditions and higher prices had only limited impact on Calgary's affordability, which remains among the most attractive of Canada's major cities." (This was interpreted by a Calgary reporter to mean that Calgary is THE most attractive of Canada's major cities).
They did not make any comments (that I could find) on the Edmonton market, even though it was the most affordable in their study. I assume that is because Edmonton is not yet showing signs of coming out of its "slump." I would suspect that will make us even more affordable next quarter (relative to other major cities).
The majority of Canadian markets experienced weakened affordability in the first quarter of 2011. "Despite the latest erosion in affordability, provincial levels generally continue to stand near their long-term averages, suggesting that owning a home remains affordable or, at worst, slightly unaffordable across Canada - with Vancouver being a notable exception," said Hogue.