House prices in Edmonton - Forecast
I have attended all but a few of these crystal ball sessions and can report acccurately that it's a good idea to gather different opinions. Richard Goatier of CMHC is generally one of the best presenters. He's fairly conservative in his projections and leans heavily on net migration and previous results, but generally speaking has in my opinion come the closest most often.
As far Economic Development Edmonton, you won't hear much negative out of them, and to be honest there's not much bad to say with GDP growth that will lead the country and be possibly 2nd in the G8. It's just their culture is more cheer than stats so I lean to the CMHC stuff.
The following are the highlights of the forecast seminar:
- The best news is yet to come. Currently the province receives only a very small percentage of oil revenues. This is due to the "Declaration of Opportunity" incentive deal made by the province with the Oil companies so that they would invest their capital to get the infrastructure built. As their infrastructure is paid off the provinces royalties jump to 25% . It is estimated that over the next 20 years the province will receive 95 Billion dollars in oil revenues based on oil at $40/ barrel. So with oil floating between $45 and $60 there is a big upside for the province of Alberta.
- Edmonton's unemployment rate is expected to be below 4%, with skilled labour in huge demand (this should lower vacancy rates, and increase property prices by increasing net migration to Edmonton)
- Net migration (the number of people who move here minue the number of people who move out) is expected to be positive at around 10,000.
- Inflation is expected to remain low at around 1.4%
- CMHC expects about 10,000 new jobs to be added to the Edmonton economy
- 2005 saw the most housing starts in Edmonton's history at 7,600 units
- By mid way through 2005 the average cost to build a home was at approximately $142/ square foot, as compared to $108/s.f. only five years earlier
- Costs for constructing new properties will increase significantly with the average new house in Edmonton costing $295,000 in 2006, up almost 10% from $268,500 in 2005
- 2006 is expected to be the second best year on record for housing starts with 7,100 anticipated
- New multi-units have peaked but their inventory level remains high
- Resale inventory levels continue to drop putting pressure on prices to increase
- The average single family home is expected to climb in value by 9.3% to $234,000 versus $220,000 in 2005, but due to higher inventory levels the average condo price is only expected to increase around 4%
- Apartment vacancy rates will drop to around 4%. Not enough for rents to really escalate for now
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