Realtors predict slight hike in house prices

First-time homebuyers opt for longer amortization periods, banker says

EDMONTON - Edmonton-area home prices will rise four per cent over the next 12 months, predicts the president of the Realtors' Association of Edmonton.

"If my forecast is accurate, then single-family detached homes will sell for $397,303 next year, and condos will be priced at $263,400," Mark Perras said Wednesday at the REA annual forecast seminar. Almost 500 realtors attended the sold-out event at the Westin Hotel.

Increases will be restrained by a large supply of listed homes and steep price hikes over the past 18 months -- offsetting the positive effects of a strong economy, positive in-migration, nearly full employment and low interest rates, he said.

Ian Glassford, chief financial officer of Servus Credit Union, also expects small gains. "Maybe one or two per cent," he said. "Not five or 10 per cent."

Glassford said the Edmonton market faces "a lot of headwind from the U.S.," where foreclosures, falling prices and tightening mortgage loan requirements have hurt real estate values.

That credit crunch affects Canada indirectly, Glassford said. He believes a more important effect is "mostly psychological" as the U. S. example causes some Canadians to lose confidence in real estate investments.

While interest rates have risen slightly, Steve Blakely, president of Servus Credit Union, noted that longer amortization periods have helped affordability. Last year, 12 per cent of Servus mortgages were undertaken with 40-year amortization periods and 10 per cent with periods of 30 or 35 years.

Lindsay Kendall, a market analyst with Canada Mortgage and Housing Corporation, predicted that Edmonton prices for all forms of resale housing will rise 6.5 per cent this year, to $360,000.

Perras pointed out that rising prices over the past three years have squeezed out many would-be first-time buyers.

"Housing is a provincial responsibility," he said. While Premier Ed Stelmach has pledged $285 million toward the problem, that promise pales beside the $6.4 billion committed to teacher pensions, Perras said.

He urged support for a range of programs for people with physical, mental, social and addiction problems, recent immigrants, and the working poor who cannot afford market rates for available housing.

Lawyer Sonny Mirth noted that parts of the higher-end condo market have short supply.

He saw "a need for larger, upscale units for empty-nesters" -- and more demand than supply of "staged, integrated housing," for residents who may need increasing levels of assistance.

Perras predicted a slight drop in residential unit sales. "I expect that 19,100 residential properties will sell through the MLS in 2008, as compared to 20,544 sales in 2007."

Ron Gilbertson, executive director of the Edmonton Economic Development Corporation, looked beyond home prices to announce that Edmonton could become one of the world's great medium-size cities by improving its safety, urban and external transportation, and self-image.

We already have a world-leading economic base, outstanding health and educational systems, and excellent cultural and recreational amenities, he said.

But Edmonton's murder rate has ranked number 1 or number 2 in Canada for two years.

Also, "we have been growing so fast that we have been unable to keep up our urban transportation system."

And Edmontonians often are their own most severe critics, Gilbertson said. "One of the worst things we do is bad-mouth ourselves."

Edmonton housing, compared to medium-size cities nationally and internationally, is "relatively affordable" he said. But he worried about the effects of economic growth on lower-income families.

"It isn't going to work if it's just the rich getting richer."

Gilbertson cautioned that dealing with greenhouse gas emissions from the energy industry presents a major challenge to this province.


Ron Chalmers
The Edmonton Journal

Thursday, January 10, 2008