Home building, costs headed up
Wednesday, December 16th, 2009
EDMONTON – More houses and condos will be built, more existing homes sold and it will be a little harder to find an apartment to rent next year.
And existing homes and rents are expected to cost more in 2010, a comprehensive new report on Edmonton’s housing market said Monday.
This strong rebound predicted for 2010 comes after housing starts in the Edmonton area hit bottom this year — the third straight year of decline, the Canada Mortgage and Housing Corp. said Monday.
Builders are on pace to begin construction on 5,000 homes, 24 per cent fewer than the year before, said the national housing agency’s Fall 2009 Housing Market Outlook for the Edmonton census metropolitan area.
It is the lowest level of activity for the region’s homebuilders since 1997, said the report, and follows a 56-per-cent decline in total housing starts in 2008.
“While single-detached construction has staged a modest recovery since the summer, a continued downturn in the multi-family sector will hold down this year’s numbers,” the report said.
For 2010, the agency expects continued growth in single-family detached homes and a moderate rebound in multiples, boosting total starts by 29 per cent to 6,450 units. While that would be a considerable improvement over this year, it compares with an average of more than 10,600 units started every year from 1999 to 2008.
For 2009, a new single-detached home in Edmonton will be an average of $535,000, up 4.5 per cent over 2008.
Still, the CMHC predicts the average price will soften in 2010 by 2.8 per cent to$520,000 because of a “lagged effect” of when homes are priced and when they are completed.
On the other hand, the agency forecasts pressure for higher negotiated selling prices in 2010 from builders who had cut their margins over the past year to clear inventory. “With better economic times ahead, land and labour costs as well as material prices such as lumber and concrete are expected to increase.”
In the resale market, the CMHC predicts residential Multiple Listing Service sales will increase this year by eight per cent to 18,750 units. Last year was the slowest for Realtors since 2003, with saw sales falling 15 per cent to 17,369 homes.
“Provided the economy and interest rates perform as expected, CMHC looks for the upward trend to remain in place during 2010,” the agency said. Total MLS sales are forecast to rise another 9.3 per cent to 20,500 homes in 2010, which would approach the level in 2007, which was the second-best year on record.
The average residential MLS price will end 2009 close to $322,000, down 3.3 per cent from the 2008 average.
A balanced market in 2010 is expected to translate into modest price gains all year, with the average resale price rising 3.4 per cent to about $333,000, CMHC said.
Home-ownership costs will likely rise in 2010 as mortgage rates are at rock bottom and prices set to increase, the agency added.
In rentals, apartment vacancy rates across Greater Edmonton will continue to trend up this year. “But landlords should see a turnaround in 2010, provided economic conditions improve,” the report said.
The vacancy rate for October was an estimated four per cent, compared to 2.4 per cent a year earlier. It was the highest fall vacancy rate since 2005.
Factors in dampening demand for rental apartments were rising unemployment, more demand for home ownership and a steady influx of condominium units.
The agency sees the rental vacancy rate falling to 3.5 per cent amid fewer new apartments and strengthening demand.
CMHC expects its fall survey to show rents largely unchanged from October 2008. “With vacancy rates starting to subside in 2010, property owners will be looking to raise rents to offset rising operating costs, in particular utilities and property taxes,” the report said.
A typical two-bedroom apartment will rent for nearly $1,070 by October 2010, up about $35 a month on average compared with October 2009.
By Bill Mah, edmontonjournal.com
