Housing supply exceeds demand in Edmonton, analysts say
But there's good news for renters, as oversupply drives rental rates down
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Alberta’s boom and bust cycle has led to an oversupply of housing stock, with new and unsold units outpacing the demand for housing.
According to Canada Mortgage and Housing Corporation’s fourth quarter housing market assessment, evidence of overbuilding increased from moderate to high in both the rental and ownership markets when compared to the last quarter.
“It’s mostly an issue with apartment units, not so much single-detached homes or other low-rise buildings,” said Brent Weimer, principal, market analsysis for Edmonton with Canada Mortgage and Housing Corporation (CMHC).
“We still see, for this year, an oversupply issue in the rental market,” he added.
CMHC considers overbuilding a concern when the supply of available housing units significantly exceeds demand, based on completed and unsold units per 10,000 population.
There were about 1,180 unsold row and apartment units in the second quarter of 2017, with Edmonton’s vacancy rate hovering at around seven per cent, compared to the national average of 3.4 per cent.
It’s a good time to be a renter in Edmonton, as overbuilding drives down rental rates.
“We’re expecting the rental market increasing incentives as landlords compete for tenants … It would allow renters to shop around and perhaps even renegotiate with their existing landlord to find perhaps a better deal,” Weimer said.
This would be second consecutive year rents on average are expected to decrease.
“We expect builders will be responding to this oversupply issue and will be slowing construction as well,” Weimer said.
Sandeep Agrawal, director of the urban and regional planning program at the University of Alberta, said the slump in the energy sector in 2015 and 2016 led to a decreased demand for housing.
“This is not new to Alberta or Edmonton. The province goes through this boom and bust cycle, and at times the building cycle is not entirely in sync with the boom and bust cycle,” he said.
He said the revitalization of Edmonton’s downtown could be one reason for overbuilding.
“Rogers Place and some of the other revitalization projects in the Quarters and Blatchford and others have provided a catalyst to build,” he said.
Weimer said he expects demand for housing units will pick up in 2018.
“We expect it to be shifting from what we would currently describe as a buyer’s market into more of a balanced market as the economy continues to pick up steam.”