Exorbitant housing prices are hammering major cities across Canada, but not in Edmonton—a city whose reputation for affordable living is attracting people from far and wide.
A much smaller percentage of an Edmonton resident’s income can service a mortgage than in the rest of Canada, enticing people to move to the city, but so is its diverse economy. And with a recession looming, that kind of security is becoming scarcer by the day in Canada’s biggest cities, where mortgage payments and rents make job precarity a wholly unnerving prospect.
“The percentage of your income required to service a mortgage or rent is far less than in any other major city in the country, so you have more disposable income at the end of the day which is attractive to young people who find it difficult to make the numbers work right now,” said Warren Pratt, a realtor and owner of Alberta on Fire Investor Team.
“That income stability has become very important as a possible recession looms, and as inflation keeps rising. Edmonton has a huge oil and gas market; it’s a large part of our economy and that will always be the case. A lot of people don’t realize this either, but there are a lot of jobs in government, tech, manufacturing, and construction. It’s a city that’s expected to experience significant growth over the next 10-20 years.”
Commodities are another robust sector of Edmonton’s economy, Pratt added.
The result of fortuitous economic developments, namely the recovery of oil and gas, and its population growth, which had been lagging for much of the past decade, make Edmonton a high contender for real estate investing. However, rising interest rates and inflationary consumer goods prices are taking their toll on real estate markets across the nation. Edmonton is no different, as home sales decreased by 12.2% in September from a month earlier, and by 15.7% year-over-year. But with listings increasing during those periods by 1.7% and 3.7%, respectively, investors and end-user purchasers have plenty of reason to dive headlong into the city’s housing market.
For example, single-family home sales fell by 13.5% on a monthly basis in September, and by 21.9% from a year earlier, meaning investors should be able to find some good deals around the city. Transactions in the condo market also declined by 13.2% month-over-month and by 1.5% year-over-year, while sales in the duplex/townhouse segment dropped by 4.9% and 7.2%, respectively, during that period.
“Canadians can buy homes for under $400,000 in Edmonton. Other communities’ housing prices climbed significantly, but as that happened, oil and gas pulled back and that curtailed any rises in Edmonton’s housing market,” Pratt said. “That’s why investors still see it as a relatively affordable place to purchase. There’s the diverse job base, and because tenants have disposable income, they can pay their rent on time and homeowners can pay their mortgages while still comfortably affording their other expenses.”
One- and two-bedroom units rent for $1,000 and $1,500 respectively, in Edmonton, Pratt says, adding that the city is attracting skilled labour from around the country because of its job market and affordable cost of living. In particular, West Edmonton and areas located around the South and SouthWest attract a lot of tenants, including young families.
Moreover, the federal government is trying to solve Canada’s housing affordability problem, which could mobilize investors.
“We do a lot of multi-family properties for investors looking for larger projects and it seems to be a perfect time for them,” he said. “The government wants to provide Canadians with affordable housing, and in order to do that they need to incentivize investors to build, renovate and provide good-quality and energy-efficient housing.”
Investors in the city are securing commercial financing, which can be much less cumbersome if the plan is to purchase a large multi-family building than it is for a single-family house.
“The way the market has shaped up with the incentives provided today, the government is trying to cool the market on the residential side but they still need to provide quality housing on the commercial side.”
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