While 2020 came in hot within many local real estate markets across the county, COVID-19 was quick to cool down activity, much in the same way that it has dampened economic activity worldwide. As we approach the month of June however, after months of social distancing, isolation, and a general ‘pause’ on our day-to-day lives, protection measures are gradually lifting across many provinces. This is allowing Canadians to slowly revisit their businesses, or other goals that had been sidelined during the public health crisis.
For real estate investors keen to get back into the game, it is worth keeping an eye out for opportunities as local markets start to rebound following the past few months of supressed activity. Below, we take a look at the post-COVID-19 real estate trends within Edmonton to ultimately determine whether the city is currently an ideal destination for real estate investment.
Edmonton’s Economic Woes
With an economy so heavily reliant upon the energy sector, Alberta has been hit hard by falling oil prices, resulting in widespread unemployment. The province was already dealing with an economic downturn long before the arrival of COVID-19, which only served to add more fuel to the fire.
While Edmonton is less reliant upon the energy sector than neighbouring Calgary, the city still felt the fallout of over 11,000 job losses last year, leading to depressed consumer confidence. These conditions have unsurprisingly caused trickle-down effects upon the local housing market, leading to oversupply, low levels of demand, and falling prices.
Things were starting to look up as we came into 2020; Edmonton was starting to attract an increased number of home-buying millennials as well as foreign investors who favoured this more affordable market over the sky-high property prices in neighbouring British Columbia. These buyers, as well as investors, were also being drawn to the city’s many new development projects.
Market Activity & Real Estate Prices in Edmonton
With social distancing, business closures, and other protection measures imposed by the government to limit the spread of the virus, COVID-19 has had a blanketing effect on Edmonton’s economy and real estate market, quieting some of the increased activity at the beginning of the year. According to the latest report from the REALTORS® Association of Edmonton, total residential unit sales for the month of May were down 41.51% compared to May 2019, and the number of new real estate listings was 20.88% less than the levels for May 2019.
Real estate prices within the city have followed the same downward slope, dropping 4.04% from May 2019 to an average residential sales price of $353,953. Jennifer Lucas, Chair of the REALTORS® Association of Edmonton commented on these dips in the most recent Monthly Market Statistics Update:
“The Edmonton market experienced a significant decrease in year-over-year unit sales, with some downward impact on pricing. Of course, with the outbreak of COVID-19 and the social distancing measures currently in place, this type of market decline is not surprising. There have been significantly fewer sales of single family homes, condos and duplexes than in May of last year. Residential unit sales in May rose sharply relative to April. With COVID-19 restrictions slowly being lifted, I am cautiously optimistic that the market may be starting to move back toward normalized levels of activity. It is too early to draw any definitive conclusions but we will be monitoring developments closely.”
The sales price of single family homes is down 4.49% year-over-year from May 2019, while condominium prices are down 14.20% and duplexes are down 2.82%.
Hope on the Horizon for Edmonton
Despite this downward movement, there remains optimism in the months ahead for Edmonton’s market. The Province of Alberta began their phased approach towards lifting lockdown measures, with select industries opening up on May 14th. This gradual lifting will help re-ignite the economy after this pandemic-influenced pause, which will in turn lift consumer confidence in time for the summer real estate market.
While the bounce-back of Edmonton’s real estate market is anticipated to be a slow one, as the market continues to gain momentum, there is hope that conditions will return to pre-crisis levels by the close of 2020. RE/MAX is predicting a modest 5% dip in residential price levels compared to 2019, which is far more palatable than the 9-18% nosedive in the national average house price predicted by the Canada Mortgage Housing Corp (CMHC).
The homebuyer population is comprised heavily of first-time homebuying millennials, many of whom are looking for newer or infill homes. The increased residential construction projects within the city will add in-demand housing to Edmonton’s inventory over the next year.
Real Estate Investment Opportunities within Edmonton
While the Edmonton market continues to be oversupplied, many of the listed homes are dated and in older neighbourhoods; there remains high demand for newer homes. Multiple offers on homes for sale in Edmonton is common, with houses selling for $20,000 to $30,000 over the listed price tag. To meet the buying preference of first-time homebuying millennials, there is great investment potential for investors willing to put the time and work into flipping some of the city’s older homes to give them a modern update.
RE/MAX is reporting a spike in the number of downsizers who are jumping into the post-COVID-19 Edmonton market from the sidelines to sell their larger homes and purchase a smaller property or condo. With an influx of these larger, outdated properties available on the market, investors can easily secure a “fixer-upper” at an affordable price and take advantage of the existing demand for updated homes.
While there remains much uncertainty regarding the post-COVID-19 economic landscape and the recovery rate of the Canadian real estate industry, Edmonton has and will continue to be an accessible buyers’ market. Ranked as one of the top 3 most affordable Canadian cities in the 2020 RE/MAX Housing Affordability Report, Edmonton will remain an enticing destination for homebuyers, as well as investors.