Edmonton has struggled beneath the weight of a crashing oil and gas sector, and while there are signs of better days ahead, the optimism is cautious.
Last month, the federal government approved the Trans Mountain pipeline, a move that was lauded by Alberta Premier Jason Kenney—a perennial thorn in Ottawa’s side—of all people, but skepticism abounds.
“Now that we have pipeline approval—that was the headwind that had influenced the market—the headwind is still that the proof is in the pudding,” said Matthew Boukall, vice president of product management and data solutions at Altus Group. “We want to see construction happen because approvals haven’t necessarily meant construction in the past. Consumer confidence will revolve around whether or not the pipeline actually goes ahead.”
While the oil and gas sector’s plummet has been a tempest, last year’s B-20 rules proved a spanner in the works of another kind.
“Housing affordability and mortgage qualification continue to be a challenge in Edmonton,” said Boukall. “Edmonton doesn’t have an affordability issue in the traditional sense, but the mortgage rules mean people can’t afford what they used to afford. People who, in a previous period, could afford a single-family house or townhouse are now looking at different built forms of what they qualify for. Getting consumers who are qualified to get a mortgage has become a bit more challenging.”
Gordon McCallum, founder, president and CEO of Edmonton-based First Foundation, noted that an unemployment rate above the national average is worsening the city’s reeling housing market.
“It looks to me as though sales for 2019 are still below 2017 and 2018 numbers for both homes and condos,” said McCallum. “The concern I still have is employment; it’s the biggest factor. Our unemployment rate is 6.8% in Edmonton, which is quite a bit higher than the national average of 5.4% and well below the 4.5% range we’ve been in for a decade when things were going well here. It’s a concern weighing on a lot of people’s minds.”
McCallum also points to capital expenditure in the province as evidence of the business community’s malaise. It’s down 38.9% from its 2014 peak and still declining.
“It’s expected to come in at $59.7 billion in 2019. It was $97.8b in 2014—that’s almost a $40b drop in investment annually in the province of Alberta,” he said. “Policy matters and if the provincial and federal governments send a message to the marketplace that it’s an anti-business environment, it makes it harder to attract investment into the region and the resulting job loss and slower economy are predictable. Bad stuff happens and markets are cyclical, but governments can make the situation better or worse depending on how they react.”
However, Altus Group’s Edmonton Flash Report 2019 forecasts a stronger market through the remainder of the year. During spring 2018, Edmontonians feared potential job losses, but this year the concern is dissipating and the report believes it could catalyze activity in the city’s housing market.
“We’re expecting more strength in the market; it was a slow start to the year because of a number of factors, including the election, a horrible winter and general market malaise,” said Boukall. “But we’ve seen strength coming into the resale market and there’s a new condo project launching downtown right now and it’s driving a bit of market demand. We’re optimistic that the market will start to improve a little bit.”