Edmonton rental market: New residence, townhome gross sales set slower tempo

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“New multi-family growth is really going to depend on migration patterns,” says Jackson Cornelius of Zonda Urban. “New multi-family growth is really going to depend on migration patterns,” says Jackson Cornelius of Zonda Urban. Photo by Ian Kucerak /Postmedia

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Edmonton’s new sales for condominium apartments and townhomes plummeted in the spring due to falling demand amid rising interest rates.

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A recent report on the multi-family segment in the second quarter — April to June — found sales fell to 185 transactions, a drop of more than 85 per cent from the same quarter the year before when 440 sales took place.

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“There are a number of factors but rising interest rates starting in March put a lot of potential buyers into wait-and-see mode,” says Cameron Slavik, market analyst with Zonda Urban, which published the report.

Sales were even lower than spring 2020 when the overall market nearly froze due to concerns about COVID-19. That spring saw 277 transactions of new multi-family units, a market driven by rock-bottom borrowing costs, unlike today with interest rates more than double pandemic levels.

Another factor is falling inventory, at its lowest level in the last four years, the reports reveal.

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“It’s a really unique time,” Slavik says, noting developers are also in a “wait-and-see-mode” before committing to more projects.

Low inventory, however, did lead to higher prices among new product with wood-frame apartment prices up 20 per cent and townhome prices increasing by eight per cent year over year.

The report notes the two product types make up 80 per cent of the new multi-family for sale market with a combined average price of about $358,000.

The price is affordable relative to other markets — and even Edmonton’s average price for a single-family detached home on the resale market, about $469,000 on average in August, according to Realtors Association of Edmonton data.

“New multi-family growth is really going to depend on migration patterns,” says Jackson Cornelius, director of advisory services at Zonda Urban, adding more people from out-of-province and internationally are coming to the city.

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He further points to Calgary’s condominium market picking up recently due to higher demand from out-of-province buyers as a potential outcome for the capital city in the coming months.

Indeed Edmonton’s new condominium market had been seeing a similar trend until the second quarter, but rising rates have dampened buyers’ enthusiasm, Slavik says.

“We are still hearing anecdotally that the out-of-town buyers see great value in the Edmonton market price-wise,” he adds.
“It was more the case in the first quarter of the year, but the perception still holds as long as prices stay low relative to those higher priced markets.”

Toronto’s average prices for resale condominiums are nearly $800,000. By comparison, the average resale price for a condominium in Edmonton in August was about $220,000, down from the same month last year when prices were about $227,000.

Still, sales picked up by about five per cent year over year in the resale market.

Cornelius forecasts the market for new multi-family should see more sales along with more supply in the coming months. “But the current challenges will probably drag out into next year.”

Despite the slump in sales, Edmonton has more favorable economic tailwinds than it has had in several years, paired with relative affordability.

“Conditions are set for strong growth that should put upward pressure on sales and prices by next spring,” Cornelius says.

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