Condo sales slump as more Edmontonians opt to rent

A lofty condo project planned for the edge of Westmount is now destined to be a seniors housing complex. Brokers say the change reflects the ongoing decline of condo sales in Edmonton.

Clifton Place, a high-end 260-unit condo building proposed by One Properties, was set to be built on a lot west of 124th Street and south of 102nd Avenue, overlooking the North Saskatchewan River.

At the end of June, real estate broker CBRE helped sell the 45,800 sq. ft. site for $9 million to seniors housing operator Revera, which plans to turn it into a rental property.

Bradley Gingerich, a senior VP at CBRE, said at a cost $1 to $2 million for a 2,000 sq. ft. unit, One Properties only sold a handful in two years. 

"It's a different market than what we were 10 years ago," Gingerich said.

For one, renting has become a more appealing alternative. 

"Years ago, there just wasn't the rental options," Gingerich said. "You were more compelled to buy a condominium than you were to rent, if that was an option for you."

Rental options can now include en-suite laundry, kitchen islands, hard-surface countertops and nine-foot ceilings, he said.

Over the same two years, Gingerich has helped broker 11 projects originally designed to be condominiums that ended as rental buildings. 

The Edgewater on Jasper Avenue and 85th Street sold for $191 million — one of his more notable projects.

Regency Developments, probably best known for its success in selling the lavish Pearl condos on Jasper Avenue, sold Edgewater to Timbercreek Communities in Dec. 2016.

"Definitely, definitely becoming a trend," Gingerich said.

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Chair of the Realtors Association of Edmonton, Darcy Torhjelm, said condo sales are down eight per cent from last year and vacancy is up more than 20 per cent.

"They're not able to sell them as quickly as they had anticipated when they first bought," Torhjelm said of the condo developers. "Because these things would be planned a couple of years ago."

Torhjelm said the sales environment has changed and while detached single-family homes and townhouses are holding their own on the market, big condo developers are unable to sustain the mortgage of a 50-unit plus building.

"So it may be better for a condo complex to turn into rentals because that will create cash flow."

Tighter mortgage rules

The shift from condos to rentals started a couple of years ago but has picked up over the past year.

Gingerich said prospective homeowners have higher thresholds to meet to qualify for mortgages.

"The new mortgage rules have really wiped out a large part of the buyers," he suggested.

The Office of the Superintendent of Financial Institutions, the agency that regulates and supervises federally regulated financial institutions, introduced the rules in January to help buyers afford to pay their mortgages, even if their incomes change.

Laising Louie, a regional economist with the Canada Mortgage and Housing Corporation, said the stricter rules are meant to help avoid the crash in the market similar to the United States in 2008.

Louie admitted the higher income threshold has had an effect on people's ability to buy.

"Generally sales in Edmonton are lower this year compared to last year," he said. "We've also had some slight movements of mortgage rates — mortgage rates have been creeping up a little bit."

More people are renting out the condominiums they already own, he said.

A CMHC rental survey last October shows 38 per cent of condos were rented out, up from 32 per cent in 2016. Ten years ago, he said 15 per cent of condo owners were renting their units.

Louie said province-wide, housing sales are down eight per cent.

Dormant offices

Sales offices touting the once-coveted condominiums are boarded up and some, like the Vibe on 116th and 107th Avenue, are replaced with rental offices.

Gingerich said a deal between the builder Carrington and an undisclosed company should be sealed next week.

Others have boarded up offices, temporarily abandoning plans to build towers in the core of the city.

Lamb Development Corp. was successful in getting the lot at 10160 106th Street rezoned for a 37-storey Jasper House Condos 2015, only to put the project on hold two years later.

Brad Lamb, CEO of Lamb Development Corp. said they sold about one hundred one-bedroom units but the more expensive condos weren't moving. 

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When oil prices plunged in late 2014, early 2015, people were reluctant to invest, forcing the company to give people back their down payments, he said.

"We haven't cancelled Jasper House the building, we just gave people their money back," he said. "The project is still there."

"Edmonton is still not a Canadian city that high-rise condos are easily achievable," he said.

Lamb isn't giving up hope the condo market will recover in Edmonton but figures it may take a few years and a rebound of oil prices and consumer confidence.

"All those things that make people want to buy stuff that cost a lot of money."

Torhjelm expects the condo market will recover.

"Now's the time to take a look because there's lots of choice, and there's lots of opportunity out there."

Prices have dropped, making it a buyers' market. The average sales price of a condo in Edmonton dropped to $238,141 in 2018 from $260,411 in 2017.

At Clifton Place south of 102nd Avenue, Revera said it plans to build a tower to accommodate 290 residential suites offering a range of lifestyle and care options and seniors apartments, Mike Brcko, VP, Property Development said in a statement to CBC News.

@natashariebe