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Tuesday, December 20, 2011 - Kelly Grant's 2012 REALTOR Market Forecast - Greater Edmonton Area

This article contains my personal REALTOR® opinions, analyses, and forecasts for the Greater Edmonton Area real estate market in 2012. [For further background and details on my theories used and assumptions made for generating these forecasts, please refer to my December 22, 2010 blog (2011 Market Forecast)].

The first question on the minds of many Sellers and Buyers in the Greater Edmonton Area: how will property values become impacted in 2012 from their current 2011 values? While there will be many diverse contributing factors that change on a weekly basis, I have generated forecasts using current market conditions. [For the summary of my forecast, refer below to ‘Table A: Kelly Grant’s Forecast 2012 Property Value Change vs. Location and Property Type’. Again, P6MSR is the ‘Past 6 Months Sales Ratio’ and EMWAL is the ‘Estimated Months’ Worth of Active Listings’. Finally the PVF (2012) represents ‘Change in Property Value Forecast for 2012’.]

Firstly, below is my summary ranking of Greater Edmonton Area divisions from best to worst of forecast change in property value for residential properties only (i.e. houses, non-condo attached, duplexes, etc.):

- Sherwood Park (ranked #1 best at +1.5% property value increase predicted for 2012)
- Southeast Edmonton
- St. Albert
- Southwest Edmonton
- Northwest Edmonton
- Leduc and Beaumont
- West Edmonton
- Northeast Edmonton
- Stony Plain and Spruce Grove
- Central Edmonton (ranked #10 worst at -3.0% property value decrease predicted for 2012)

My overall residential houses forecasts for both the Greater Edmonton Area and the Greater Calgary Area is a modest -0.5% drop predicted for 2012 (both cities with over 3 months’ worth of active listings on the market).

Secondly, below is my summary ranking of these same areas from best to worst of forecast change in property value for condominium properties only (i.e. apartments, townhouses, carriages, etc.):

- West Edmonton (ranked #1 at -1.0%)
- Northwest Edmonton
- Southeast Edmonton
- Sherwood Park
- Southwest Edmonton
- Central Edmonton
- Northeast Edmonton
- St. Albert
- Leduc and Beaumont
- Stony Plain and Spruce Grove (ranked #10 at -5.0%)

With the high current supply my overall condominium forecast for the Greater Edmonton Area is a slight drop of -2% (over 4 months of active listings) for 2012 and -1% in the Greater Calgary Area (< 4 months EMWAL).

For acreages within an hour of the City, both Edmonton (-5.0%) and Calgary (-8.0%) appear headed for drops with between 9 months to over a year worth of active listings (high supply of unsold listings) on the market.
As for the commercial properties, with a sizable number of active listings I would expect the Edmonton market to drop about 3% for commercial in 2012 with even higher drops in Calgary (5%) and Vancouver (10%).

Next, summary of forecasts: how did my 2011 forecasts match up with the actual 2011 change in property values? Table B below illustrates my Greater Edmonton Area predicted vs. actual property value changes:

My best 2011 forecasts (highlighted in blue) of predicted vs. actual margin of error were as follows: Calgary – Residential; St. Albert – Condominiums; Sherwood Park – Condominiums; Greater Edmonton Area – Commercial; and the City of Edmonton – Residential and Condominiums; and Stony Plain – Residential.

Five clearly incorrect predictions in 2011 (highlighted in red) were as follows: Greater Calgary and Vancouver – Commercial; Greater Edmonton Area – Acreages (1 hour to City); and Leduc, Beaumont, Stony Plain, and Spruce Grove – Condominiums. For the commercial properties in Calgary and Vancouver, despite the surprise in 2011 based on current market conditions I am still predicting large average price drops in 2012. The fact that commercial prices in 2011 went up in these cities with a high increase (despite market characteristics that suggested the reverse could occur) was very surprising to me, and it could be suggesting that a ‘market bubble’ is starting to form with commercial real estate in Calgary and Vancouver (meaning investor Buyers in these areas should be very careful), even though the residential markets in Calgary (for example) appears relatively stable with only marginal drops predicted in 2012. As for the unexpected condo stability in Leduc, Beaumont, Stony Plain, and Spruce Grove, this is obviously good news for those areas although I would still urge investors to remain cautious as I am predicting a 5% decrease in condo values for those areas in 2012. The same advice for acreages within an hour of Edmonton – my estimate: an average 5% value drop in 2012.

In closing, with expected strong oil prices, net inflow of population, sustainable rate of new home builds, and a reliable Canadian financial banking system I predict for the most part the Greater Edmonton Area real estate market will remain relatively stable (unchanged) in 2012 with a few sectors that will experience some minor fluctuations in property values. To help the reader put many of the figures in perspective: a 1% price change on a $400,000 property is only $4000 so the % changes up or down are in most cases not that significant vs. the overall value.

Again I will take this opportunity to wish everyone (my past and future clients) a safe, prosperous holiday season and Happy New Year!

[Article written and ©2011 by Kelly Grant, M.Eng., ABR, NCSO, P.Eng. - REALTOR® at Maxwell Devonshire Realty in Edmonton, AB]

Disclaimer: for those readers not currently represented by another licensed REALTOR®, to obtain more information on this topic and / or if you are serious about selling or buying in the Greater Edmonton Area, call Kelly at 780-414-6100 (pager) or send Kelly an email to SOLD@KellyGrant.ca to schedule a confidential appointment.

posted in General at Tue, 20 Dec 2011 17:04:20 -0700

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