CLEANING THE VIEW OF CALGARY FOR REAL ESTATE INVESTORS
Reading the headlines is like looking through a dirty window sometimes. It’s missing a lot of clarity. As real estate investors, we’d rather not speculate; we would much rather clear through the mess and get to the facts.
So, the first point of clarity is simple: real estate in Calgary today is not a short-term play. There are flippers out there, but Calgary is currently about buying low and holding for the medium to long term. In the short term, no one is cashing big cheques, or expecting huge growth (appreciation).
If you live here, you may have forgotten some of the advantages of living in Alberta. Specific to real estate investors: Alberta has no land transfer tax (that’s right, ZERO), and the Landlord Tenant rules here are much more favourable for the Landlord. Problem tenant? There is a process to deal with that and solve that problem.
Next up is the real estate cycle: Calgary is at or near the bottom, just starting into recovery. This is the ideal time to grow a portfolio! There’s nothing original about “buy low and sell high,” except that it works! An economy that has been through a downturn means an economy that has limited downside risk. Isn’t that what we also want with our real estate investments?—low risk?
Okay, so what about the fundamentals? Well, if you follow all those stats, you’ll notice that they vary from source to source, expert to expert. We will only quote one today. GDP is expected to grow minimally in 2020 in Alberta, 0.9% according to ATB (Alberta Treasury Branches Financial); then predictions for 2021 increase to 2.1%, also according to the most recent ATB forecasts. Job growth has been slow, and there are fewer and fewer layoffs now. Unemployment for the City of Calgary was 6.8% in Dec of 2019, down just slightly from 7.0% in Dec 2018. The net positive migration to Calgary was 9560 people based on the most recent census; again, humble growth, but no longer declining. And have you seen the most recent vacancy numbers for Calgary? The overall vacancy is roughly 3.9%; this is a grand improvement from the vacancy rate of 7.0% in the winter of 2016-17. In dollar values, the rents in Calgary are quite flat; however, if you remember just 2-3 years ago, every possible tenant was asking what “extra perks” landlords would give them. Prospective tenants are no longer in control—and landlords are again seeing better applications and more choices.
So what about Property Purchase Demand; what about the big sexy cheques that come with a market that is appreciating? Honest truth? Not here, not today, not this year. Some experts are predicting maybe 1.5% growth for 2020—in both the real estate market (think purchase prices and demand), and in the rental growth rate. If you want big appreciation—it needs to be a different market than Calgary for 2020. But if you have a fear of losing equity (in other words losing or risking your down payment), there appears to be limited downside risk.
Calgary is a market entering a slow recovery. We have a low risk, long term advantage compared to many of the hot markets in Canada today. Cashflow is possible, and the suburbs are showing great value. If investors choose to wait for more momentum, they will miss some of the astonishing bargains from motivated and distressed sellers. And we all love instant equity on the BUY!
This is a little clarity on the Calgary market for Real Estate investors. A few dry facts instead of a few splashy headlines. Now, it’s time to get clarity on your next steps towards your Financial Freedom!
