ECONOMIC CONSTRUCTION UPDATE
Have you noticed? Many top bankers and economic experts are still talking about “re-building” the economy after Covid. So we thought we’d follow the “smarty pants” and provide a construction update.
GDP. It seems most of the top minds now agree that Alberta’s economic output dropped by 7.9% in 2020: unprecedented, worst in the country, etc…. The final numbers won’t be confirmed for months yet, but many top minds are looking at about 6.0% recovery in 2021. And now the predictions vary, but experts are suggesting 4.0% “ish” GDP growth for 2022. If they’re right, that would suggest that Alberta will get back to a “net zero” by mid-2022. Said another way, June of 2022 is expected to bring us to the same place we were at in February of 2020. Suboptimal for sure, but progress and growth nonetheless. In the greater global context: we’re ahead of some and behind some, but we’re doing ok. From a “boots on the ground” construction viewpoint, many Albertans would say that we’re fighting and clawing our way back.
Employment. Overall, Canada is celebrating with a big drop in unemployment from 6.7% in October to 6.0% in November 2021. Alberta shows virtually identical unemployment numbers of 7.6% for both October and November 2021. Calgary has a small increase to 8.1% in November from 8.0% in October. Edmonton shows improvement to 7.6% in November, from 8.0% in October. We fully acknowledge that employment numbers can be a rabbit hole, with many factors to analyze. And yes, our updates tend to oversimplify the bigger employment picture by simply reviewing the trends. Anyone interested in more details can easily find a plethora of information on the StatsCan website—but that is beyond the scope of a simple weekly newsletter.
Real Estate. Let’s start with the rental housing provider’s view of the Alberta re-build. According to Rentals.ca, the average Canadian rent for all properties is $1800/month; this is a modest increase of 1.6% annually. Savvy investors will note that this rent increase doesn’t keep pace with inflation. In Calgary, the average 2 bedroom rent is $1576 (November 2021 Rent Report, which uses October numbers), which shows a 1.3% improvement month over month, and a 7.1% improvement year-over-year. Definitely a good news story for rents in Calgary.
Real Estate. And now we’ll look at real estate if you’re buying or selling. There are a LOT of green arrows! Prices are up. Sales are up! Sales literally refers to the number of units sold in the month. November sales were just short of the 2005 records! Experts suggest this is currently being driven by FOMO (fear of missing out) due to the expectation that interest rates will rise in 2022. Benchmark Price overall is now $461,000 for Calgary, a 9% increase year over year. Detached homes have a new benchmark record price of $542,600; that’s an 11% increase year over year. Inventory is low: 2 months overall, and only 1.2 months of detached inventory. The surrounding markets of Airdrie and Cochrane are doing very well, Okotoks is slightly cooler, but still showing strong sales and pricing.
Like so many things in the construction industry today, the re-build isn’t as fast as everyone would like it to be. However, there are clear signs of good progress. We didn’t even touch on the increasing diversity in the Calgary Economy!
As we enter the season of predictions, we are continuing to be grounded in the stability and slow growth that we see in the Alberta economy. Inflation and interest rates may rise in 2022, unemployment may continue to fall. As real estate investors we’re focused on positive trends and looking to expand our portfolio in 2022. We hope our friends and colleagues are also keeping it real, and keeping it positive, as we look forward with enthusiasm and hope.
