Building Permits Decrease in Metro Edmonton
In the last quarter of 2015, the city of Edmonton experienced a significant drop in the number of active building projects with just $1.4 billion pulled in from building permits. This appears to be evidence that the construction boom that kept the city’s economy vibrant while much of the province suffered has officially cooled off.
The city raked in $1.8 billion in the same time frame in 2014, and the $400 million drop is a huge blow to the local economy. Commercial development has been a key driver for Edmonton, and while sliding oil prices damaged local economies in Fort McMurray and Calgary, Edmonton has been shielded to some extent thanks to an existing interest for commercial projects.
If the recent turn of events suggests an indefinite staling of commercial development, it could mean a further weakening scenario in the coming quarter and that spells trouble for local jobs. The most recent statistics show townhouse construction has dropped and according to local city-economist John Rose, the current economic conditions are a major growth deterrent.
Both 2014 and 2015 were very productive for the housing sector, and especially for multi-family housing starts – however the city is going through a pullback in two main areas; the actual number of housing starts and also the value of existing building permits.
Apartments and townhouses have taken the biggest hit and according to Rose, the province simply isn’t recording new settlements as fewer people are moving into Edmonton. The value of permits taken out for the second quarter of 2016 is valued at $1 billion, and that represents a 48% reduction from the $2 billion seen in the first quarter.
Back in 2010, the local municipal released a development plan dubbed The Way We Grow, an ambitious project that set at least 25% of then-upcoming residential projects to be located in the downtown area and in the more mature neighborhoods. Six years later, only 14% of the plan has been realized (8,475 infill housing units) and subsequently this means that 86% of new housing projects in Edmonton may still be defined as suburban.
The brief run up in apartment and condo construction was a key source of income not just for the city but for a horde of developers and the like, all of whom have had to make inconvenient adjustments as they prepare to face similar challenges through 2017. It should be noted that South Edmonton hasn’t experienced any significant slowdown and construction is ongoing for quite a number of projects, however the downtown area will show signs of slowing down.
This reduction is mainly in regards to new construction, so we can expect ongoing projects to carry on for the moment. A few developments have been scheduled for 2016 and 2017, and unless things take a turn for the worst, there should be some type of construction work going on in the area.
The Canada Mortgage and Housing Corp. had estimated a decline of housing starts by 195,000 this season, an indication that subtle signs of regression had been picked up across the board. There is a silver lining in all this: if and when things start to pick up, Rose suggests that the city won’t have an overload of product and the resultant price crash.
It’s always a serious concern particularly around Toronto and Vancouver where a deteriorating housing market left countless new houses without people to move in. However, Edmonton hasn’t seen such a situation yet.
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