TURBULENT TIMES
Has anyone else noticed that “turbulence” seems to be replacing “unprecendented” as one of the key economic buzzwords for 2023?
So we looked it up. Turbulence can be defined as “chaotic changes in fluid motion.” The explanations go on at great length: the gist of it is that turbulence is a very complex phenomenon in physics that is difficult to analyze. Yup, sounds about right. Well, we weren’t happy with the inertia of the early pandemic days, so I guess it’s a “be careful what you wish for” lesson?
On a more practical level, most of us can remember an episode of turbulence in a plane. Typically, these turbulent incidents don’t last forever, nor do they make the destination any less worthwhile. However, airplane turbulence is undeniably uncomfortable, real, and even frightening in the moment.
Sure sounds like the world of real estate investing in Canada as we begin 2023. Don’t you wonder how it will all end up by New Year’s Eve 2023?
But let’s stay focused in the moment. Good heavens there are hundreds of predictions for GDP right now! The IMF is warning that up to 1/3 of the world is likely to experience a recession in 2023. Ok, so we’re aware of the big picture slowdown that is the most likely scenario. The experts are still predicting that Alberta should fare better than most places where GDP is concerned.
Job growth is typically the next economic fundamental that we review each month. Both Canada’s and Alberta’s unemployment rates, seasonally adjusted, are largely unchanged from last month: Canada is 5.0% for December, Alberta is 5.8% for December. Not much turbulence there! Calgary’s unemployment rose in December, to 6.6%, while Edmonton’s unemployment dropped a smidge (my technical term!) to 5.4%. And if you like working non-stop, Lethbridge continues to be the place to be, with an unemployment rate of 3.0% (down from 3.5% in November). Of special note for our Ontario friends who are new to Calgary: the downtown core still has a 33%-34% vacancy rate in office buildings – even after several buildings have begun to be converted into multi-family residences. The jobs are coming, and many are here already, but the downtown core isn’t booming yet.
As far as the 2 key economic influencers of 2023, we just might be reaching some stability? Less chaos? Inflation appears to have peaked last year. And interest rates are unlikely to continue with such dramatic increases as we saw last year. Phew! That should make our real estate property pro forma’s and budgets a little easier to manage/plan for this year.
How did this all translate into the real estate market of 2022? Overall, 2022 saw record high sales in Calgary. As of the December numbers, Calgary’s overall benchmark price was $518,800, up 7.8% year over year. Price growth for detached (over 14%), semi-detached (12%), rowhouses (15%) and condominium (9%) were all positive. Also, we saw similar patterns for Calgary, Airdrie, Cochrane, and Okotoks: peak pricing was in the spring, but property values still increased when compared to 2021 prices.
Our Financial Freedom continues to be our destination of choice! We continue to be excited about the slow and steady demand for real estate properties and rentals. And yes, we fully anticipate some volatility and unpredictability in the path ahead. But we’re not quitting on our goals! We will be closely watching the inventory story and inter-provincial migration, as two key factors this year. And we’re listening carefully to where the new jobs are coming into Alberta and the Greater Calgary region. Because we’re not speculating, or banking on fast passive appreciation, we’re confident about our choices to move forward in 2023. All these new immigrants, and very soon the Gen Z wave, need a place to live. We can handle a little turbulence! We have the resilience of 7 years of Alberta recession under our belt. We’re ready.
