We all love it when the path ahead is clear. When the light is red, most people stop, and when it is green, most people go. Ah, but yellow is the wild card: stop or go, slow down or speed up—or does it depend?
I find the Calgary economic fundamentals right now are a lot like a yellow light. Some signs point to moving forward, some data suggests caution, and some stats are flat out pointing to a red light.
GDP: So far in Alberta, our GDP growth has floated around 2.3%. In comparison Canada’s GDP (second quarter) was 2.9%, and Alberta’s GDP last year was 4.9%. So Alberta is behind the national average, but still growing despite the oil industry issues—interesting.
EMPLOYMENT: For October, Alberta’s unemployment rate was 7.3%, Calgary isat 8.3% and Edmonton is at 6.2%. In Septenber of 2017, Calgary was at 8.4%–largely unchanged. However, the Calgary CMA added 8200 jobs from January through October of 2018, for a 1% increase, mostly in the goods-producing sector. Yet at the same time, Alberta is showing overall job losses of 2900 jobs in September and 2700 jobs in October. And new research out of the University of Calgary is showing that when people do lose their jobs in Alberta, that period of unemployment lasts on average 3 times longer than it used to (20 weeks now versus an average of 7 weeks in 2008). It continues to fascinate us that Alberta’s weekly wages are still the highest in the country (green light). However, we are also watching as at least one company has announced more layoffs. If oil production is cut, will there be another round of job losses? (red light)
POPULATION: Calgary’s civic census is reporting a 1.7% increase in population. While there are babies being born, and international migration numbers, it is very interesting to note that inter-provincial migration numbers are now rising: net migration in 2017 was just 974, but the 2018 numbers are reporting a net increase of 11,588! Are Canadian businesses finally taking advantage of cheaper office & commercial space? Are these “new” jobs in Alberta actually job transfers from other areas of the country?
VACANCY RATES: Calgary’s average vacancy rate is being reported by CMHC as 3.9% overall (down from 6.3% in 2017). The average 2 bedroom rental for October 2018 is listed at $1272, up slightly from October 2017.
HOUSING MARKET: Ah, so much could be said here! Benchmark prices are down approximately 3% and there is roughly 6 months of supply in the housing market (new CREB numbers should be out over the weekend). Relief for home-sellers does not appear to be coming anytime soon—but opportunities for homebuyers look very intriguing for 2019.
INTERNATIONAL UNCERTAINTY: Brexit is moving forward—the full effects on the European markets remain to be seen. USMCA issigned today, but again, what will the full impact be? The USA and China continue their trade disputes. And Saudi Arabia ….stay tuned.
So what’s a real estate investor to do? We provide rental housing, and in times of uncertainty we play a little offence (green light) AND a little defense(red light). Today we take possession on our next rental property with a JV partner. This one was acquired below market value, to give us a buffer in case of ongoing housing price decreases—defense. It was bought in a community with good potential for growth related to anew shopping and commercial area that will be built, and good access to the new Southwest Ring road—strategically positioned. We will provide efficient upgrades over the next few weeks to create the most appealing product possible for our customers (tenants)—offence. And then we will provide quality property management (aka good customer service)—more offence. We are choosing to carefully and methodically grow our portfolio and take advantage of the current buying opportunities. We encourage our friends and colleagues to make their own assessments of the current rental and housing markets. It’s easy to choose a path when all the lights are green. It’s much more challenging to find the opportunities in the path less traveled.
