The Edmonton real estate market has been very resilient so far in 2016 despite the fact that oil prices are still stubbornly low. Home prices have fallen by about 3% when compared to 2015. However, sales are down dramatically by around 20% with around 750 homes sold in February of 2016. There are a lot of listings on the market right now and most buyers are taking a wait and see attitude. They want to hold out and see If prices will fall further, and they may be concerned about their jobs with all the layoffs that have happened in Edmonton this year.
How will the Edmonton real estate market perform for the rest of the year? That all depends what happens with energy prices. If oil can recover to the $50 to $60 range in the next few months, companies will start to benefit from all the cost cutting they have done in the last year and a half. If they can become profitable again at those price levels, they may start to hire some of their people back, or at the very least, stop laying people off. This in turn will help to stabilize the real estate market and bring back more of a balanced market where neither the home buyer or the home seller has an advantage.
However, if oil prices stay at the $40 level or fall back to the $20 or $30 range for the rest of the year, then we can expect more pain in the real estate market. The oil industry in Alberta relies on much higher prices to be profitable since the cost to produce our oil is very high due to the fact that it is extremely hard to extract from the oil sands. This requires a lot of very expensive labor and technology to get the oil out of the ground. In fact, the cost of producing a barrel of oil in Alberta’s oil sands is more expensive than almost any other oil producing region in the world.
The one thing that the Edmonton property market has going for it that the rest of the province doesn’t have, is the fact that all the provincial government employees are in Edmonton. None of those unionized and highly paid people have lost their jobs, so they can still afford to be buying and selling homes on the Edmonton MLS system. Cities like Calgary, and Red deer have been hit by this downturn much harder than Edmonton because their economies, and their real estate markets, are much more dependent on the energy industry.
Regardless, Alberta has been through this type of oil induced recession before, and has always been able to recover and thrive after the downturn is over. I expect the same thing to happen this time as well.