Edmonton's apartment-style condos are ripe for investment

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Edmonton is tops among the nation for condominium investor profitability, a new study shows.

Yet the demand for resale apartments is among the coolest segments in the city’s real estate market, which may partly explain why the condo market seems like a deal for investors, says a local realtor.

“Edmonton is probably the cheapest part of the national condo market,” says Kristal Smith, realtor with eXp Realty in the city.

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“Prices just haven’t gone up that much, and they’re not going up as much as rents have.”

Those conditions have made Edmonton a ripe market for investors, as a new study from Zoocasa — a national realty firm — shows.

It notes that — based on the average price of an apartment condominium in the city, which it cites was about $202,000 — an investor would have a monthly mortgage payment of about $886.

That sum is based on a 20 per cent down payment for a five-year, fixed-rate mortgage at 4.79 per cent.

By comparison, the average monthly rent is about $1,553 in Edmonton, the study adds, a difference in cost of $667 a month — the largest gap among the 23 markets surveyed.

Most other markets are far less lucrative for investors, including several where average rent is less than the monthly mortgage payment for a condo. That includes Abbotsford, B.C., where the mortgage payment on the average condo — about $436,000 — was $6 more a month than the average rent.

The study did not include major markets like the Greater Toronto Area and Vancouver because it was positioned for a big-city audience, given its title: The Best Cities for Torontonians to Rentvest In.

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In Toronto, by the way, even purchasing the average priced condominium generally far surpasses the maximum mortgage amount an individual can qualify for based on the city’s median income.

Toronto’s average condo price was about $748,000, the study shows, while the average income was about $62,000. An individual earning that much annually could only qualify for a mortgage worth about $275,000. At the same time, average monthly rent remains very high at more than $2,800.

Despite the market’s attractiveness, investors in Edmonton are far from the norm, but many who are buying to invest are indeed “from out of town,” says Smith, adding they recognize the market as a potentially lucrative proposition.

“For between $1,000 and $1,500 a month, you can get a condo that will include your mortgage and condo fees, and you can’t rent here for much less.”

Despite the attractive climate, investors remain rarities thus far, says realtor Ed Lastiwka, associate broker with Royal LePage Noralta Real Estate.

“Most clients buying condos are first-time buyers, downsizers or parents buying condos for students” attending post-secondary.

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Still, the market could be heating up.

Realtors Association of Edmonton statistics show sales for condominiums increased in July year over year by nearly a third. That’s outpacing single-family detached homes sales growth, at about 28 per cent — though the segment remains the most popular buyer choice of buyers in Edmonton. Yet row homes sales growth was even better, up nearly 52 per cent.

As well, average condo prices experienced among the largest drop month over month in July, down 3.4 per cent, among segments. Only semi-detached prices fell more at 3.6 per cent.

If conditions remain soft amid rising rates, more investors may look to Edmonton, Smith says.

In the meantime, the market remains within reach for first-time buyers, she adds.

“If you’re renting, buying a condo makes sense because you’re building equity and likely paying less than you’d pay in rent.”

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