City set to lead house prices

'Sizeable' double-digit increases likely again, housing study predicts

Ron Chalmers
The Edmonton Journal
Thursday, March 08, 2007

EDMONTON - Edmonton will see the biggest jump in housing prices in Canada this year, according to a major Scotiabank study released Wednesday.

"Edmonton is the only city to meet all three criteria of strong demand, tight supply and affordability," said Scotiabank economist Adrienne Warren, who studied 23 Canadian cities.

"This powerful combination will sustain a market-leading pace of construction, sales and price increases."

The Edmonton area will see the largest price increases of any major market, Warren said, predicting "double-digit increases below last year, but still sizeable."

By the end of December 2006, Edmonton prices were up 48.7 per cent from December 2005.

The Edmonton Real Estate Board predicted price growth would slow to 15 per cent in 2007.

But after only two months, prices are already up almost 10 per cent over last year, to an average of $321,307 for all housing and $375,412 for single-family homes.

Housing demand in Edmonton is sustained by Canada's second-highest rate of combined population and employment growth, trailing only Calgary.

She rated Edmonton's housing supply as tighter than any other metropolitan area of more than one million people.

Rising prices are "a major concern," said Richard Nutter, a retired professor of social work who works with the Greater Edmonton Alliance to organize renters threatened by conversions of low-rent apartments to condominiums.

Middle-income families still can buy homes, but "there is a real shortage of affordable housing in Edmonton" for people on low incomes, he said.

Warren measured affordability by comparing mortgage payments to rents, and found that owning a home in Edmonton costs on average $590 more per month.

The gap is $899 in Toronto, $952 in Calgary and $1,794 in Vancouver. On balance, Warren rated Edmonton homes as relatively affordable.

Nutter sees little affordability for the tenants of 504 Strathearn Heights apartments that may be demolished and replaced by 1,750 condo units.

"I met one woman who has lived there for 50 years. A substantial number of tenants have no place to go."

The City of Edmonton has a policy that includes a vague requirement that five per cent of units in new developments be reserved for affordable housing.

"The Greater Edmonton Alliance would like to expand that to 10 or 15 per cent," Nutter said. "Twenty per cent of families are living below the low-income cut-off."

Warren's prediction of strong housing starts sounds right to Reza Nasseri, CEO of Landmark Group of Builders.

"We certainly have felt it already," he said. "In the last three or four months of last year, there was a pause by purchasers and by builders -- because there was no land available."

But sales and starts have been brisk since January, and "a lot of the land that was being serviced last year will be available in June and July," he said.

"We see sales continuing at least as good as last year."

Warren called Canada's housing market "the rabbit that just keeps on going and going," while in the U.S., housing starts are down roughly 25 per cent and resales by 10 per cent in the past year, and prices "are posting significant declines" in many markets in the western and southern states.

Canada is unlikely to follow the U. S. because "speculative investing has been less active, overbuilding less prevalent, and high-risk lending less widespread," she wrote.