‘TIS THE SEASON OF … PAUSE
This week the Bank of Canada did what many people are already doing: pausing. But here’s our monthly update for the action-takers!
Whether it’s consumers, businesses, or lenders, it seems everyone is just taking a moment. Luckily, we’re not seeing panic, just caution.
Canada’s 4th quarter GDP has already been widely reported as 0.0% https://www.cbc.ca/news/business/canada-gdp-statscan-economy-1.6762612.
So what do the experts think for 2023? Hehe, don’t you worry, they all have an opinion. Here’s one: https://www.bdc.ca/en/articles-tools/blog/2023-economic-outlook-cause-caution-not-alarm, suggesting GDP growth for 2023 of 0.5% nationally. Provincial numbers take a bit longer to analyze and report, but ATB is predicting GDP growth of 2.6% for Alberta in 2023, https://www.atb.com/company/insights/the-owl/alberta-economic-outlook-march-2023/.
As far as employment goes, did you see all those headlines about Canada adding 150,000 jobs in January, instead of the predicted 15,000? Alberta added 21,000 jobs for January 2023—not too shabby! Canada’s unemployment rate is 5.0% for both January and February. Calgary’s unemployment rate is 6.6% for both months. And Alberta’s unemployment rate is down slightly to 5.8% in February, from 6.0% in January. Nationally, wages grew 5.4% year-over-year.
So how about population? Canada is targetting to have another 460,000 + permanent residents this year, 500,000 for next year. Canada also admitted over 400,000 temporary foreign workers between July and December of 2022. In addition to immigrants, Alberta is also seeing a dramatic rise in inter-provincial migration: https://www.westernstandard.news/news/alberta-experiences-record-interprovincial-migration-in-third-quarter-of-2022/.
So what does this mean for real estate investors: Alberta’s economy is so far proving to be resilient, jobs are here, and even more people are coming. Bottom line: an ample supply of tenants—with jobs (that’s for those of you who remember 2016-2018). Are we sure we should be pausing our real estate investing strategy for 2023?
In Calgary, the real estate market is a story of low inventory. The headlines talk about sales being down, but that is in comparison to record highs of 2022. Some people are even calling 2022 a “Unicorn” year. And, with fewer choices on the market, some buyers are waiting. Did you know that only 400 new homes hit the market in January and February of 2023 in Calgary? Despite this the benchmark price is still below last spring’s peak. No panic, and no frenzy.
What’s going on? There are simply fewer people right now with BOTH the ability and the confidence to jump into the real estate market. That’s right. Nevermind all the analytics, economics, fundamentals, etc…, because feelings still matter (to the majority of consumers and even some investors) when real estate purchases and sales are transacted. Canadian consumers have been uncharacteristically negative in recent months. However, at the end of February, the reading showed a little optimism creeping back in: https://www.bloomberg.com/news/articles/2023-02-27/canada-consumer-confidence-housing-optimism-lifts-sentiment-to-six-month-high?leadSource=uverify%20wall. Small business confidence shows a similar pattern of lower-than-average confidence levels, but with a slight improvement on the most recent “pulse check.” https://www.atb.com/company/insights/the-owl/cfib-business-barometer-february-2023/.
That’s a lot of links to data! So, what’s our point? There is risk and some uncertainty with every investment opportunity I have ever investigated. Yes, even a GIC (because if I only get 2% interest, and inflation is at 5%, then I’m losing the value of my money=and that’s a risk in my books). However, for real estate investors in Calgary and Alberta today, the upside potential and current demand are suggesting that this is a time of opportunity. Will it be “good enough” to grow our financial freedom? We think so!
