CMHC Spring 2009: Housing Market Outlook-Edmonton CMA

New Home Market

After exceeding 11,000 units for five successive years from 2002 to 2007, total housing starts across the Edmonton Census Metropolitan Area (CMA) declined by nearly 56 per cent in 2008. Housing starts across Metro are forecast to decline by 51 per cent this year to 3,250 units.

Resale Market

Following a 15 per cent decline in 2008, existing home sales will fall by another 16.5 per cent this year before staging a moderate come back in 2010.

Rental Market

Edmonton's rental apartment vacancies will trend higher in 2009 despite few rental starts. CMHC's fall 2009 Rental Market Survey is expected to find an overall vacancy rate across the Edmonton region of close to four per cent compared with an average 2.4 per cent reading in the October 2008 survey. New rental supply is arriving in the secondary market rather than from traditional sources of purpose-built apartment units. Supply in the secondary market is coming from investors who have decided to rent out their units rather than sell them at reduced profits (or losses).

Mortgage Rate Outlook

Mortgage rates are expected to be relatively stable throughout 2009, remaining within 25-75 basis points of their current levels. Posted mortgage rates will increase very gradually during the course of 2010, reflecting a rise in government of Canada bond yields.

Economic Overview

Edmonton remains Alberta's foremost supply, service and staging area for the energy sector. With a substantial number of drilling rigs expected to sit idle this year, the impacts of this slowdown will be widespread.

Despite the recent rise in unemployment, income growth remains encouraging. Average weekly earnings grew by over six per cent in 2008 although growth rates moderated slightly during the first three months of 2009.

Unemployment will average near 5.5 per cent across the region this year, a level last seen in 2003. The jobless rate will remain low by national standards and will encourage continued moderate levels of in-migration. Net migration in 2009 will pull back from the previous year and will fall below the peak years of 2005-2006. The levels expected this year and in 2010 will still compare well with the average witnessed over the previous decade.

While there are still a multitude of industrial projects underway across the region, many will wind-down over the next 12 to 24 months. Infrastructure spending remains the bright spot for the economy. With municipalities reporting a 25 per cent reduction in the cost of projects, many communities may ramp up infrastructure plans in order to benefit from the slowdown in the construction industry. Some of the larger projects include the Edmonton Ring Road (Anthony Henday Drive NW), Southern LRT extensions, University of Alberta Edmonton Clinics, Royal Alberta Museum, Edmonton Remand Centre, and the Edmonton International Airport expansion. These projects alone, most of which are well underway, represent close to $4.64 billion in construction spending.

Full report can be accessed at: http://www.cmhc-schl.gc.ca/odpub/esub/64343/64343_2009_B01.pdf