Number of unsold new homes in Edmonton hits record high in January

Almost 2,000 new Edmonton homes were unsold in January.

Edmonton's number of unsold homes breaks record fifth month in a row

Edmonton is experiencing record high new home vacancy rate. (CBC)

Edmonton's new home market is mostly inert, with 79 per cent of new homes sitting vacant unsold across the city in January.

The numbers were highlighted Friday by ATB Financial in its newsletter The Owl.

Of the 2,460 new homes in Edmonton completed in January 1,941 were unsold. That's a 7.5 per cent increase from the previous record set in December.

ATB says January was the fifth month in a row Edmonton saw a record high number of completed but unabsorbed homes. The numbers for January were 63 per cent higher than at the same time last year.

"What we're seeing is a bit of an overbuild that began in 2018," said John Rose, the City of Edmonton's chief economist.

"There was a period in 2018 and late 2017 where we didn't see the housing starts come down even though the housing market had softened … Basically the industry couldn't move back fast enough and they got a little ahead of themselves."

Rose predicts the numbers will stabilize and gradually come down to normal levels by the end of the year, but for now it's putting strain on building companies.

Stress test too stressful

ATB says tougher mortgage financing rules, the economic downturn and stagnant wages are contributing to the glut.

Bryce Milliken, president of the Edmonton region of the Canadian Home Builders Association, says he's not surprised by the vacancy numbers.

"It was to be expected," said Milliken. "The residential construction industry has been feeling the pain of the market and the general economy and the changes by government on these mortgage rules for a number of years now."

Milliken says the stress test in Canada's mortgage rules is making it particularly difficult for millennials, first time home buyers and newcomers to get into the housing market.

"The stress test was put in place to deal with Toronto and Vancouver," said Milliken. "It's done its job, and it's time to change that so that we can open up these markets and take the people who have been artificially removed out of the market and get them back into a position where they can buy a home.

"The hope is that we'll have some government intervention and [they'll] recognize that the stress test and these mortgage rules have been overreaching."

Building permits down in Edmonton

Rose says another indicator of the new home industry in the city is a drop in residential building permits.

The latest numbers from the city show Edmonton had 22 per cent fewer building permits in the fourth quarter of 2018 than the year before.

Despite the current stagnation in new home sales, Rose believes the market will increase because the population in Edmonton continues to grow.

"We've seen very solid migration numbers supporting population growth and that will turn the housing market around," he said.