Edmonton New Construction Update: July 2010

Single family homes under construction in Edmonton continues to increase as a delayed response to the recovery between mid-2009 and earlier this year. The result of this will be a higher supply of single family homes going into a downturn. While the level of construction is still below that of the boom it could be a concern given the condition of the resale market and continued (relative) weakness in migration and employment.



The level of condos under construction remains low as it took longer to shake off the glut from the boom. That's probably a good thing. However, the number of condos completed and not absorbed remains high.

I expect single family starts to fall off a cliff decrease substantially later this year as resale becomes more competitive due to falling prices. Also people are going to be reluctant to build if it means unloading a property in this market.

craigslist rental sample

The price to rent ratio remains elevated in Calgary and Edmonton. I suspect this is due to an irrational negative attitude toward renting in Alberta and very low interest rates. However, I do think that some part of the price difference between Alberta and the US is a real difference between the cost to rent (and build). Its simply more expensive to rent in Calgary and Edmonton than Phoenix and because of this prices should be comparatively higher.

Consider this selection of craigslist rental ads for $1250.

Edmonton

$1250 / 2br - Apartment For Rent at RentersOnline.com

Two -2- Bedroom, apartment condo , approx 900 sq ft with a nice sized west facing balcony in a 3 yr old west end elevatored building is available immediately. The suite comes complete with fridge, stove, dishwasher, washer and dryer.

The suite also features underground parking.

The unit is on the top floor so there will be no noise from above.

Heat and Water are included in the rent.

The master suite has a walk in closet and full 4 pce bathroom. The second bedroom has a large closet with sliding mirror doors. The second bathroom is next to the second bedroom and is a full 4 pce bathroom and also houses the upright washer and dryer.

The suite also has a full storage room and linen/storage closet.

The kitchen, with ample counter and cupboard space, is open onto the living/dining room and comes with an island.

The suite is located in an area that is close to schools, YMCA, parks, shopping, dining,transit , just south of the Whitemud and just west of 170 st.

Lease duration is negotiable but preference is given to a 1 yr lease.

Calgary

$1250 / 2br - Stylish 2 Bedroom Upper Suite in Killarney (Killarney / Inner City)

Beautiful and bright 2 bedroom upper suite in the desirable inner-city community of Killarney. Minutes from Downtown, Marda Loop and Mount Royal College. Located on a quiet tree lined street conveniently nestled just several blocks from 26th Avenue and 17th Avenue transit corridors. Close to Westbrook and Westhills shopping centres; Killarney pool; parks, and University of Calgary with easy access to Crowchild Trail and Glenmore Trail.

Crisp, clean, open concept suite with laminate and tile flooring and a brand new renovated bathroom. Features a private balcony, high ceilings and in-suite laundry. Street parking (a two car insulated garage is also available).

No smoking or pets. Please call for more information and to schedule a showing of this beautiful suite!

Phoenix (Mesa)

$1250 / 3br - 2Ba-Single Story-2160 SqFt-3 Car Garage-Inc Gardener (Mesa)

This is a Spacious near new 2160 SqFt 3br 2ba single story home. 3 car garage with electric garage door opener. Beautiful earthtone carpet, and tile through out. Large master bedroom with sitting area and a hugh walk-in closet, garden tub, and separate shower. Raised vanities, ceiling fans, separate laundry room and Faux wood binds throughout. Upgraded kitchen cabinets, gas range and microwave. Grass landscape in rear with rock landscape in front all irrigated by electric timer. 1 mile South of 60 Freeway close to schools and shopping. More pics and floor plan on request.

• cats are OK - purrr
• dogs are OK - wooof

First Place Edmonton

After the failed draw, the south side townhomes from the First Place Edmonton are now on the MLS.

I compared this to another townhouse listed on the MLS.

	First Place	Summerside
List	$267,918.00	$249,000.00
bdrms	2	3
baths	1.5	1.5
size	905sqft	1291sqft
parking	outdoor	double attached garage
yard	unfenced shared	decorative fenced
year	2008	2003

The Edmonton Journal had previously said the First Place townhouses were being sold at a "cut rate" in a shameful display of collusion between the media, the city and developers to soak some remaining first time buyers.

11 down, 74 to go

The First Place Edmonton program had very few applicants. Even less than I could have expected. Of 85 townhomes 11 have buyers after the draw today. See today's 630 Ched article (thanks squidly):

There were only 15 applications for 85 new town homes designed for first-time buyers.

The city held a draw this morning to match applicants with individual town home projects in Canon Ridge and Greenview. Those are former unused school sites.

Of those 15, there will only be 11 buyers since in four instances applications were sent in for both properties.

10 minutes ago I saw Global Edmonton coverage and they did NOT mention the disappointing application turnout. Actually they covered a couple who applied and mentioned that they were lucky to be picked from the draw. Rohit did confirm that they are making a profit (I presume if they sell) just not as big as other projects. Also in the Global coverage they mentioned that there were 30 townhouses in Millwoods between 250K-285K . They did not point out there are an additional 110 townhouses priced below 250K in Millwoods as well.

See previous posts here and here

Update: here is a link to Global Edmonton's Coverage

Developer pwn3d city

defintion of "pwn" here FYI.

My last post was not very clear on the subject. I think that the First Place Edmonton program is a way for the city to make availabile some land, and to provide a builder incentive primarily to help developers make profit. By builder incentive I mean that the city is bearing the cost of deferring payment of the land for 5-years, which is not unlike other private promotions offered to lure buyers. Also I think the land cost of these units, from $30,000/unit at the southside development, is on the low side and somehow the final cost ends up being not terribly affordable. Maybe the developer's "costs" make up some of the difference.

Specifically, I am concerned about the 2-bedroom south side townhouses. Of the 43 units at the southside location 27 are two bedroom suites between 905-921 sqft. From the site:

2 bedroom unit $229,400 town home + $30,210 land = $259,610*
3 bedroom unit $238,800 town home + $38,780 land = $277,580*
2 bedroom accessible unit $276,400 town home + $29,750 land = $306,150*
*Prices do not include GST and are subject to change without notice.

Two bedroom units are $249-$253/sqft without considering the land cost and $281-$286/sqft with land. From Bob Truman's site sales price per square foot in July was $244 for condos, which includes land and GST. Granted this average would include older building but it also includes condos with underground parking, townhouses with fenced yards and garages and properties in more expensive neighborhoods than Millwoods or NE Edmonton. Also the floorplan raises some concerns. Note on the main floor how there is no closet by either entrance and the bathroom is directly adjacent to the kitchen/dining room.



Also the resale comparisons I made in the last post are still on the market. The 1345 sqft Millwoods townhouse is still $274,900, the duplex in Caynon Ridge is $279,000. The least expensive 3 bedroom/1.5 bath townhouse with double attached garage in Summerside is now $283,900 down from $288,00o from last post.

Anyway it will be interesting to see if all these 2-bedroom condos will be unloaded by August 12th when the "draw" takes place.

This of course is my totally biased opinion, the Edmonton Journal said that these units are being sold at a "cut rate". My advice would be not to take their word for it and explore other housing options before committing to this program.

Marketing Synergy

The city of Edmonton teaming up with Rohit, Landmark and the Edmonton Journal to build and market townhouses for stretched wage earners in a program called First Place Edmonton. The prices aren't terribly cheap at $266,710 for a two bedroom townhouse in Millwoods. The land is valued by the city at $30,000-35,000 so Rohit could end up with $235,000 to build the structure of a two bedroom 906sqft townhouse with no garage and an unfenced yard. In the same area of Millwoods some townhouse prices appears to be competitive to these values. For Example:

This townhouse is fairly close to the development in Greenview. It is built in 1989 but unlike the City of Edmonton/Rohit townhouse it has an attached garage and a third bathroom. It has quite a bit more space (1345 vs 906 sqft) for a similar asking price of $274,900. The appliances, finishing and exterior appear to be fairly good from the photos.


This 1995 duplex with attached garage is close to the Canyon Ridge development at $279,000 is a few thousand more than the townhouse but has a back yard and more space.



The Edmonton Journal appears to be helping advertise these units for Rohit and Landmark developers in the article titled "First-time buyers catch a break in housing deal"

Under the new program announced Tuesday, 85 townhouses in the Greenview and Canon Ridge communities will be sold at a cut rate to qualified first-time home buyers.

The lottery is a nice touch as it is a well known marketing strategy used by developers.

In order to buy one of the 85 townhouses, applicants must enter a city-run lottery. There are strict guidelines on who can enter the lottery. Potential buyers must have a combined family income of $69,000 to $88,000 per year.

The qualifying metrics are outdated as they use the now defunct 40-year mortgage. From the First Place Edmonton site:

* Must be first-time home buyers in Canada
* Must be Canadian citizens or have permanent resident status
* Must be able to obtain qualify and have pre-approved financing (based on 5 % down payment, 40 year mortgage amortization, 32% gross debt service ratio and 42% total debt service ratio)
* Must be employed and have a combined income between $69,000 and $88,000, see your financial lending institution for more details.
* Must have a net personal worth less than $15,000, excluding a primary vehicle, locked-in or group RRSP and the 5% down payment required for the condominium unit.
* Applicants must agree to be full time occupants and residents of the condominium unit for the first five years.

Since this program was initiated 40 year mortgages have been discontinued by the Government of Canada because they pose too great of a risk to the financial system. It is interesting to note that the City of Edmonton suggested these mortgages to help Rohit and Landmark developers sell houses.

I just don't see how these deals are remarkable. Other examples of townhomes can be found throughout Edmonton. A 2004 townhouse in less central but more "faux-posh" Summerside is listed for $288,000. This listing has more space, a double garage and has been on the market for some time so the market price may differ from list.


Just north of Ellerslie Road there are a glut of townhouses in this price range and lower lingering on the market. This is very apparent when using the REALTOR.ca website with map search!