This morning attended the 25th Annual Housing Forecast Seminar with over 700 other attendees including fellow Realtors® and guests. The panel was full of industry experts including:
John Rose – Chief Economist, City of Edmonton
Angus Watt – Managing Director, Individual Investor Services, National Bank Financial
Premier Allison Redford – Premier of Alberta
Brad Ferguson – President and CEO, Edmonton Economic Development Corporation
David Lan – Senior Market Analyst, Canadian Mortgage and Housing Corporation (CMHC)
Darrell Cook – President, Realtors® Association of Edmonton
To start things off John Rose gave a picture of the Edmonton business and commercial climate. He began with how global markets are slow, the US is slowly recovering and we are seeing positive developments, China is seeing signs of economic life indicating 2013 should be better than 2012 for most financial markets excluding Europe. In 2013 the Canadian economy should continue to grow, with exports driving Alberta’s nationally leading economy. Rose predicted Alberta will see growth better than 2012, and continue to be one of fastest growing markets in North America.
Edmonton’s economy will see a little slower growth than 2012, being moderate in terms of rate of growth but still emphasizing Edmonton’s ideal market conditions, as oil prices and the energy sector should remain stable. Edmonton has seen continued job growth with a current unemployment rate of 4.3 % (the lowest rate in Canada). This will create a tight labour market which is great for job seekers but tougher on employers looking to fill positions and grow their businesses. ALberta will be creating more jobs than other markets and see a growth in working age population and net migration in working population.
Rose predicts we see a reate of inflation of 2% – 2.5% in the year to come, and that we will likely see natural gas and electricity prices move up in the coming year. As stated growth will be moderate in 2013, and the local economy shoudl fair much better than national average. The high growth sectors may start to pivot away from our typical manufacturing/industrial and shift more towards consumer industries like retail, personal services, entertainment and hospitality in the coming years. The Canadan housing market may be stumbling a little but that is not the case for Edmonton. However if consumers focus on global news and lose confidence that could impact our local markets.
Next Angus Watt provided some financial prespectives on our current housing situation. He started with the reality the low interest rates have failed to ignite recovery projected by the US Federal Reserve. At a meeting on December 12, 2012 the US Federal Reserve has shifted to a focus that interest rates will stay the same until unemployment rates drop to 6.5%, inflation stays below 2.5% , and long-term inflation remains well-anchored. Further going to explain that the US economy and employment rate does not paint the clearest of pictures. There is a larger unemployment rate in youger Americans with higher debt loads that will have a more difficult time becoming homeowners at a time that US homeownership is so affordable which would be of great benefit to stimulating their economy. Although the situation is still slow to improve in the US, the Canadian market indicates 87% of Canadian homeowners have more than 25% equity in their homes. While Canadian housing affordability index is not as high as the US, Edmonton’s affordability index (at 131.41, over 100 is good) is much greater than most markets in Canada, where Toronto’s (70.27) and Vancouver’s (48.73) further illustrating the desirability of the Edmonton housing market.
Premier Allison Redford spoke positive about the Edmonton housing market and its indication of our strong economy. She stated “People are coming to our province to make a living but also to make a life”. With our provinces projected population growth of 1 million in the next 20 years, we need infrastructure to grow to meet these needs. Redford outlines many recent and projected improvements in legislation that will provide improved consumer protection when moving forward with homeownership.
Brad Ferguson although continuing with the positive theme of the morning, provided some refreshing analogies of the condition of our economy. Edmonton has created a desirable economic market where competition will forever be redefined. We are starting to see a transition, our boom/bust history is mellowing from volitile commodities to a more resilient economy. Ferguson stated “Edmonton will be an economic and entrepreneurial powerhouse”.
Ferguson outlined some dark clouds on the horizon that we need to keep watch of at the global, national, and provincial levels, followed by industry, firm, and personal levels. He stated that demographics are changing with more immigrantion brings financial qualifying hurdles and more desire for rental units over purchase. There will be a shift to more singles and downtown density as this is expected to double in the next 7 years. Interest rates and taxation will have to be adjusted in the future and his suggestion was 2013 should be the year of the balance sheet. Alberta has created an environment that is desirable in the present global market. So while “the world is down, now is our time, we have a competitive advantage” so their message is “come build [IT] here”.
David Lan of CMHC provided an overview of 2012 and what to expect in 2013. In summary – employment will continue to grow, migrants will continue to move to Edmonton, Alberta’s sales moving up while listings trending down, balanced market supports positive price growth, elevated supply to inhibite single-detached starts, apartment starts driving multi-family construction, low vacancies means higher rents and more rental starts.
In Edmonton we have a sale to listing ratio above 45% so we are seeing a balanced market with this likely to continue in Alberta which will mean continued moderated price growth of about 2-3%. Single detached starts should stay stable contributing to good competition in the resale market. Vacancy rate should be staying low since there is a lot of demand and not enough supply.
The seminar was concluded by Darrell Cook the new Realtors® Association of Edmonton president. Cook emphasized our associations current slogan “Realtors® – Here when life happens”, which continues to hold true. He outlined a couple condo investment scenerios stating that with current rents and market values investors need to be looking for long term value appreciation and watch the numbers on the purchase. He illustrated the market is currently driven by homebuyers rather than investors and with inventory levels down we are finding selection is limited in some prices ranges creating an increase in demand.
The RAE predictions included single family detached pricing to increase 2% for 2013, condo pricing up 1%, we should see an stregthening of rural/recreational sales and a stronger commercial market. Total number of MLS® sales should increase by 3% for 2013. With this market forecast I see this being good for sellers but also for buyers who can predict their growth and time their purchase accordingly. In Edmonton the market is stable. 2013 Should bring steady but strained growth, so when listening to market activity this year be sure to make sure you are listening to local information to have an accurate snapshot of what is happening as illustrated Edmonton is well positioned economically and has a stable real estate market.