Metro Edmonton
Real Estate Trends and Price Forecast

HIGHLIGHTS

• Home values in Metro Edmonton have been flat. This is in contrast to Calgary, which has the hottest market in Canada.

• A multi-factor analysis identifies Metro Edmonton as a moderate risk real estate market. Keep reading to find out why.

• Budgets for home purchases are under strain due to the significant increase in mortgage rates since their historical lows.

This article covers:

1. What is the current state of the property market?

2. Where are prices headed?

3. Should investors sell?

4. Is this a good time to buy?

1. What is the current state of the property market?

Home Price Overview

Metro Edmonton has a population of roughly 1.2 million and was ranked 76 of the best 100 cities in the world in 2021. However, it was dropped from the top 100 list in 2023.

The pandemic turbocharged the Metro Edmonton housing market, driving up prices at a remarkable pace and causing aspiring homeowners to be pushed further away from their dreams. And just when they thought things couldn't get trickier, rising interest rates now force even more potential buyers to sit on the sidelines.

For those contemplating selling their homes, time is of the essence. Early Spring is the best time to sell because there is typically less supply.

Prospective homebuyers might consider waiting for a lighter mortgage burden. Mortgage rates are relatively high but are expected to fall in late 2024. Patience will be needed because forecasters keep revising their predictions, pushing out the date when they expect rates to drop.

The market fundamentals are riddled with risk and uncertainty as consumer sentiment has taken a substantial hit. But remember, consumer sentiment can be a volatile and unreliable predictor of future price trends.

Metro Edmonton Detached House Prices

After the peak in Spring 2022, house prices in the Edmonton area fell significantly and have now bounced back. Government intervention successfully shielded the real estate market from the pandemic-induced recession, but now higher interest rates are weighing on the market.

We believe politicians are hoping to guide the market toward a typical annual real estate cycle with price growth in the range of 1 to 3% annually – in line with income growth.

Edmonton’s house prices indeed stand out against the declining trend in other major Canadian cities like Vancouver and Toronto. While several factors contribute to this disparity, three key elements play a significant role:

1. Supply and Demand Imbalance:

• Limited Supply: Edmonton has experienced lower active listings compared to other cities, leading to a shortage of available supply. On the other hand, Edmonton has high levels of home construction. As these homes are completed, they could ease the supply shortage.

• Steady Demand: Despite economic fluctuations, Edmonton attracts new residents due to its relatively affordable housing and job opportunities. This consistent demand puts further pressure on the already constrained supply.

2. Investor Activity:

• Increased Investment: If we assume that the Canadian average of 20-30% of purchases being made by investors holds true in Edmonton. These investors, attracted by higher rental yields compared to other cities, see Edmonton as a lucrative market. Investors buying activity further reduces available housing for owner-occupiers and contributes to price increases.

So, while other cities experience price corrections due to various factors, Edmonton's housing market benefits from:

• Underlying solid demand from new residents arriving from other provinces and abroad.

• Limited supply, creating competition and pushing prices up.

• Higher rental yields compared to other markets attract investors.

Metro Edmonton New Construction Home Prices

Prices of new homes have been dropping, which is inconsistent with the price data for the sale of existing homes. As a result of this downward trend, some homebuyers might find they will have paid more than the most recent buyers in their development. Based on economic fundamentals, it is likely that they will continue to drop.

Does this concern you? Read the Pros and Cons of Buying Pre-sale Homes

Consistent with the weak pre-sale prices, housing starts have been trending lower.

Market Risk

Based on Mortgage Sandbox Analysis, Edmonton is at moderate risk of a significant market correction.

Metro Edmonton Condo Apartment Prices

After breaking records during the pandemic, Metro Edmonton condo apartment values are significantly lower. Demand for condo apartments is also much weaker than in most previous years.

With more people working-from-home, we expect developers will begin marketing larger (i.e., 2 and 3 bedrooms) apartments to meet buyer preferences. As the supply of more generous floor plans comes to the market, it may depress the values for small floor plan condos.

At Mortgage Sandbox, we would like developers to build 4 and 5 bedroom condos because:

• Not everyone can afford to buy a house for their family.

• Canadians who now work from home need more room to segregate workspace from living space within their homes.

• Many Canadians with longer working hours find it challenging to stay on top of necessary house upkeep (i.e., mowing lawns, clearing eaves, shovelling sidewalks).

• Many people prefer to live in higher-density neighbourhoods with all the essential amenities within walking distance.

Metro Edmonton Townhouse Prices

Very affordable for first-time homebuyers

Edmonton’s home prices are very affordable. A first-time homebuyer household earning $94,000 (the median Metro Edmonton household before-tax income) can get a $380,000 mortgage. That’s more than enough for a first-time homebuyer to buy a condo, but buying a house is now out of reach for at least 1 in 3 Edmontonians.

What about the rest of the West?

Read the Vancouver Home Price Forecast, Okanagan Valley Home Price Forecast and Calgary Home Price Forecast.

2. Where are prices headed?

There is a lot of uncertainty in the forecasts for 2024, 2025 and 2026. Many of the forecasters we've surveyed have different expectations for:

• Will the federal government achieve its aggressive immigration targets?

• How long will mortgage rates remain high?

• Will Canada experience a shallow or deep recession?

There is no consensus among economists.

How do we arrive at our forecast range? Check out our full assessment of the five factors that drive these forecasts. These five forces help explain why several forecasters are anticipating price drops.

At Mortgage Sandbox, we provide a price range rather than attempting a single prediction because many real estate risks can impact prices. Risks are events that may or may not happen. As a result, we review several forecasts from leading lenders and real estate firms, and we then present the most optimistic estimates, the most pessimistic prediction, and the average forecast. Want to learn more about real estate risk? We've written a comprehensive report explaining the uncertainty level in the Canadian real estate market.

Our forecast inputs:

• CMHC Housing Outlook

• Moody’s Analytics - Canada Housing Market Outlook

• Fitch Ratings Global Housing Forecast

• Reuters Housing Forecast Poll

• Royal LePage House Price Forecast

• RE/MAX Housing Market Outlook

• Canadian Real Estate Association Quarterly Forecast

• RBC Home Resale and Price Forecast

• TD Bank Economic Housing Outlook

• BMO Housing Outlook

• Calgary Real Estate Board Forecast

3. Should Edmonton investors sell?

From a seller’s perspective, the Edmonton market provides sellers with a negotiating advatage, and the annual real estate cycle usually favours sellers in the first half of the year.

Sellers should always consult a mortgage broker early to prioritize flexible loan conditions and reduce the risk of mortgage cancellation penalties. Find out more about the benefits of a mortgage broker.

Planning to Sell? Check out our Complete Home Seller’s Guide.

4. Is this a good time to buy a home in Edmonton?

It’s hard to say, prices keep rising so there is a risk of being priced out of the market, at the same time there is a risk that the Edmonton market could weaken due to the impact of the rest of Canada. It's almost impossible to time the market. If you are buying your forever home and don't plan to sell for 10 years then the risks of buying now are lower.

Regardless, the annual real estate cycle usually favours buyers in late summer.

If you are considering buying, be sure to drive a hard bargain and pay as close to market value as you can. Also, when it comes to financing, don't bite off more than you can chew.

Are you planning to Buy? Check out our Complete Home Buyer’s Guide so we can walk you through the end-to-end process and get you ready to buy your new home!

Here are some recent headlines you might be interested in:

• Bank of Canada: era of very low rates is likely over, people and firms must adjust (Reuters)

• Bank of Canada deliberations show some felt rates may need to rise higher (Global News)

• Bank of Canada likely done raising rates, to cut by mid-2024 say economists: Reuters poll (Reuters)

• Rising rates on homeowners and the shocks that lie ahead (CMHC)

• Upcoming mortgage renewals have homeowners concerned (Edmonton Journal)

• Canada is in for a cooler winter in real estate as sales slow: CREA (Global News)

• Home Prices in Canada Are So Stretched That Even Owners Want Them to Fall (Reuters)

• Posthaste: The risk of forced home sales is rising in Canada, warns economist (Financial Post)

• B.C. real estate market notches downward amid climbing interest rates, association says (Vancouver Sun)

• LACKIE: Bleak times for Toronto real estate market (Toronto Sun)

• Calgary Real Estate Board reports 17 per cent increase in October home sales (Calgary Herald)

• Vaughn Palmer: End of the line for single-family neighbourhoods in most of B.C.(Vancouver Sun)

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