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Tuesday, August 08, 2006

Edmonton House Price Worries

The article below discusses the concern on pricing in Edmonton. I'd be worried if my home was in Vancouver, Toronto, or Calgary but right now our market still holds good value for buyers compared to other markets in Canada, and Alberta, especially when you consider employment, taxation and the province's fiscal position.

It may be true that some workers will hold off on recolating to Edmonton based the price of housing. That should curb the positive net migration that the city is currently enjoying, which is a major factor contributing toward the current demand for housing. Should the demand lower of course, future price increases will be affected. However, there are still many opportunities for savvy buyers to find properties and negotiate fair deals for those properties. In some cases many agents are having their strategy of having offers presented at a specific date back fire on them, giving buyers some good options.

If the reports of Alberta's economic position as a power house economy hold true, than it may be some time before prices in the Edmonton area weaken. How much they will weaken, how much they'll go up before they do, and how fast they will rebound from a downturn is anyone's guess. One thing is certain though, if you don't want to move to Edmonton you don't have to, but we'd sure love to have you.

House-price worries
The Edmonton Journal
Published: Tuesday, August 08, 2006

In the past few years, Edmonton held one advantage over other Alberta cities in attracting workers: Moderate housing prices. But the current boom may finally be taking the shine off that boast.

Prices in the city have jumped by 35 per cent since last summer, bumping the average single-family house to $303,304 and the average price for condominiums to $188,831.

That's still well below prices in Calgary where the average single-family unit in July was $403,630.

Or consider Ft. McMurray, where in June the average was $469,304.

Higher housing prices are a symptom of prosperity all across the province. In Red Deer, prices are almost at Edmonton levels: $297,543 for a single-family home.

Still, the hefty increases in recent months mean that housing in Edmonton is moving out of reach for many young people coming to join the boom-time workforce. With a wage of $20 a hour, you won't qualify for a mortgage for a condo at an average price of $188,000, says Madeline Sarafinchan of the Edmonton Real Estate Board.

"Everyone with patience and money will find a home, but realtors are concerned that the housing pressures are severe at the bottom end of the market," says Sarafinchan, adding that some businesses have seen new recruits leave because they can't find anything suitable.

There are uncomfortable echoes of an earlier boom here. In the late 1970s, when interest rates soared to double digits and oil prices were rising, the dream of home ownership meant impossible debt loads. The provincial government stepped in for a few years and subsidized mortgage payments, an expensive intervention that nobody wants to see repeated.

The problem right now is simply an overheated economy, says Ray Watkins, chairman of the Edmonton chapter of the Urban Development Institute, the developers' association.

Contractors are working full out and even if there were more lots available, it wouldn't be possible to get more houses built, says Watkins.

"Everyone has a labour problem," says Watkins, adding that housing industry "in all facets" is working at capacity. "I don't think anyone foresaw the record demand occurring for as long as it has."

Indeed, the increase has come breathtakingly fast. For much of the mid-1990s, housing starts for metro Edmonton stayed relatively steady, with 4,962 starts in 1997 and 5,947 in 1998 moving up to 7,855 in 2001.

Suddenly in 2002, starts spiked dramatically to 12,582 and have held at those record levels ever since.

Edmonton fortunately has a number of high-density projects on the way, in the old Heritage Mall site, for instance, and the North Edge of downtown, that will help meet the demand.

The housing crunch is not severe enough to warrant special measures now, but it's important for the province and municipalities to keep a watchful eye.

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