Edmonton real estate market headed for 2016 correction: Experts
The city's housing market is set to be dragged down by the same forces kicking the rest of the economy.
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Both the price of a house and a square-foot of office space will fall in 2016 in Edmonton, experts say, as the city begins to be dragged down by the forces that have weakened prices elsewhere in Alberta in 2015.
"Edmonton has bucked the trend, positively, compared to Calgary," said Elton Ash of Remax Western Canada, after the release of the company's annual residential house price report Thursday.
Ash said Edmonton's house prices increased by 2.5 per cent in 2015, an anomaly compared with other Alberta cities.
The cause, he said, is Edmonton's booming construction industry, which is acting as a buffer against job losses the city has experienced in the oil and gas sector.
"But, if we look at 2016, it isn't quite as rosy. We're going to see a price reduction of 3.5 per cent."
The central part of Edmonton's construction boom that has protected residential housing prices is about to soften other real estate prices — in the city's office space market.
David Young, a managing director with CBRE, a commercial real estate firm, said about 1.8 million square-feet of new office space will hit the market over the next two years.
Young said the Edmonton office space supply is small compared to most cities, with about 15 million square-feet currently available.
Further, he said, the market only "absorbs" about 110,000 square-feet of new space per year.
"Economics 101 says the [office space] market will be softer," Young said.
Still, "We needed the new buildings," Young said.
"We did not have any significant construction for 20-plus years. But it's going to leave a significant amount of 'backspace' in the towers where these tenants are vacating."