Price remains the No. 1 driver of the Edmonton housing market.
By Steven Sandor | November 13, 2020
The housing market is showing signs of recovery on a national basis. The Canada Mortgage and Housing Corporation reported that more than 262,000 housing starts were made across the country in August of 2020, and that’s the highest monthly total in 13 years. It’s not simply a number that shows improvement over a few coronavirus-ravaged months; it’s a generational high.
But, Alberta has been slow to follow this trend. According to the Alberta government, housing starts were down 14.8 per cent in this province from January to August of this year, compared to the same time period in 2019.
That’s definitely not a rosy picture, but one to be expected as the province wrestles with low oil prices and, well, COVID-19.
But what are developers and builders seeing in the Edmonton market at the macro and micro levels?
Edmonton offers great value compared to other Canadian centres when it comes to housing. Statistics from the Realtors Association of Edmonton show that the average price for a single-family home in August of 2020 was $447,000, while condos sold for an average of $221,000.
That’s still significantly less expensive than Calgary, which reported average prices of $551,446 (detached) and $250,664 for apartment-sized properties — over the same time period. And we’ve all heard how badly Calgary has been hit by the oil slump.
But that also presents a challenge for developers and builders, who are under pressure to keep housing costs down, while land costs rise.
Andrew Harbinson is co-owner of Metro Enterprises, which specializes in infill within the city’s borders.
While he said the company isn’t actively soliciting new business through the COVID pandemic, what he’s seen in recent builds is that clients want all of the amenities that come with a character neighbourhood, but want homes that are modern.
“Lots of glass, angles, clean finishes, that’s what we’re seeing,” says Harbinson.
Why rebuild rather than renovate? Harbinson says the homeowner needs to weigh if the renovation will add value to the home, and if the renovation is easier to pull off than a rebuild. For example, in a custom build, a client can ask for the builder to provide spaces for his or her needs. If someone wants a media room, it can be wired for all the latest gadgets. If someone wants a home gym, that can be set up from scratch. But, in an existing, older home, is it worth having to rewire for a media room? Does the space work for a home gym?
“The value is having a new home in an old neighbourhood,” he says.
And, even though many of us associate infill with homes that are priced higher than you’d find in new subdivisions, this is still a sector that’s very price-sensitive. And that’s why, when building a home on spec, where the home is built on a desirable plot of land in order to attract a prospective homebuyer, the “v” word — value — is key.
“Land values in Edmonton are appropriate, though we have seen a bump,” says Harbinson. “It’s very important for us to be able to buy land at the right price. If the price is too high, we can’t build value into the home.”
The City of Edmonton publicly lists land that is available for developers to purchase, from large multi-acre subdivision-ready spans to infill lots. A September search of the city’s listings found:
A 6,682 square-foot spot in Forest Heights, on Rowland Road, available for the reduced price of $535,000; a 3,373 sq.-ft. lot in Evansdale (152nd Street and 94A Avenue) available for $85,000 and a nearly three-acre spot in Kiniski Gardens (38th Street and 38th Avenue) for $2.45 million.
Value is exceptionally important to those who develop subdivisions, too.
Jim Brown, president of Sherrick Management, says Edmontonians are “exceptionally price sensitive.” Many of the communities built in Edmonton’s greenfields are designed to have more density than older, centrally located communities like Glenora or Westmount. Southern communities have access to green spaces such as the Mactaggart Sanctuary or other parks along Whitemud Creek. Communities are designed to have most of the amenities their residents need, from grocery stores to schools to transit access to drug stores and medical offices.
But, as the design in the outer ring becomes more urban in nature, as townhomes rise in popularity, Brown believes that one of the biggest factors in getting someone to buy into said community is still that final price tag. “We’re always finding the balance between reducing cost without compromising quality,” he says.
In fact, Brown says the rise in townhouse construction — and sales — is motivated by people being able to get a ground-oriented home at an affordable price.
It used to be that Edmonton’s zoning bylaws limited how many townhouses could be built in an acre to a range of 17 to 21.8, and that meant many developers didn’t feel there was enough density or value to make it worthwhile. Basically, there weren’t enough properties to sell per square acre to justify what it cost to acquire and pay the servicing costs on that land.
But, when those restrictions were relaxed, developers could add density, build more townhouses per square acre — and that helped create a boom. Basically, the zoning changes altered the value proposition.
There are many other preparations developers have to make before the houses are built — costs to build transit stops and drainage ponds, all of the things which prep their communities to be lived in. Brown said a big-ticket item are the wide residential streets, which he said the cities mandate to support buses.
“Building roads to accommodate buses is hugely expensive. It’s millions in cost. And those costs are passed back onto the consumer.”
The city has some subdivision-ready land available for purchase. Want to build a new community in Glenridding Heights, at 163rd Street and 21st Avenue? Those nearly 20 acres are worth $5.8 million.
One thing that’s clear: Whether it be townhomes or detached houses, Edmontonians, for the most part, want front doors and yards.
“What we see is that Edmontonians want ground-orientated, single-family residential,” says Ryan Smith, president of homes and residential rentals for Cantiro (formerly the Beaverbrook Group of Companies).
What happens is that customers have their hearts set on having their “own” homes, and are willing to compromise on space, whether it be some square footage in the interior, or maybe smaller yards.
“The question, really, is what are the trade- offs or compromises,” he says.
What people want are higher end fixtures and amenities within the home. So, in order to get, say, some fantastic finishes or the best faucets on the market, people are willing to sacrifice some family-room space or have smaller backyards.
As for amenities within the neighbourhood, Jodie Wacko, president of communities and commercial for Cantiro says that the big, central park isn’t something that modern home-buyers love.
“What they’re looking for is linear linages, rather than the central park that almost no one goes to,” he says. And what does that mean? Trails for cyclists and hiking. So, a great trail surrounded by greenery, that con-nects neighbourhoods, or can take people from residential areas to a commercial hub, is preferred. You can build swing sets and splash parks along the way.
And, as for making neighbourhoods more self-sustaining, Wacko says that what’s needed is patience. He says it takes 15-20 years from when the first residents move in to fully flesh out what a neighbourhood will become.
“When we talk about those services and retail that will move in, first you need the rooftops there. What we need is a bit of patience.”