Just returned from a ten day trip to
Ottawa and Mid Atlantic US. Of course, home coming is not always a great experience when you have the worst weather of pretty much all the big Canadian cities.
Ottawa has the highest family income in the country yet prices are roughly 40% lower than those in Edmonton or Calgary. They have pretty strong employment, tones of recreational activities, milder weather, proximity to the US (to get all those cheap US cars, clothing, gas and what not) and bigger Canadian cities (Montreal and Toronto) and an economy that’s diversified (federal government and high tech).
The rental market there is soft, not unlike that of Edmonton in early 2005. Free Ipods with a yearly lease are a common incentive.
We saw an ad by a custom home builder offering homes for $156/sq foot that included a treed one acre lot at a location not too far from Ottawa. Perhaps, a location similar to Morinville. But Morinville, Alberta is so different, and that’s why the cost per square foot here is easily double of the values in Ottawa. Instead of getting a 2000 square foot home on a one acre lot here, you instead get a crappy 800 square foot condo for $275k.
This is not to say that Ottawa is fairly priced. But as compared to Edmonton and Calgary, almost anything would look fairly priced. The market there has been growing at a rate closer to the inflation rate, than to the 50% or so we witnessed during last several years here.
While visiting one of the show homes, the ‘new home salesperson’ told us that they are getting a lot of visitors from Edmonton and all of them were complaining about the high prices in Edmonton.
Just for perspective, home prices were a lot cheaper in Edmonton until about last year. 2004 average Edmonton price was around $179k, compared to Ottawa’s $235k.
But we know what happened after that when the prices in our city rose to around $350k at the peak earlier this year.
As I’ve harped several times in the past, there’s no fundamental reason for prices to be this high in Edmonton or Calgary. Both the cities can expand for hundreds of miles in all directions. There’s no shortage of raw materials. The only constraint-labour-will ease in near future. Of course, in the short term, people can believe in all types of fantastic stories, but in the long term reality eventually sinks in. And it might be painful for a lot of leveraged home owners and speculators in our province.
The price per square foot in Edmonton is a little below $300. It has been falling for the last several months after reaching a high of around $330 in summer. I expect that when all the dust has settled, this number will be cut by half. Or perhaps more. Even then, the prices will be higher than they were at the end of 2005.
I’ll post some observations from New Jersey in my next post.
Finally, thanks for the wonderful participation and commentary by all.
