FALL FORECASTING IN CALGARY?!
Trying to keep a finger on the pulse of autumn weather in Calgary is quite a challenge! The only thing we know for certain is that the weather will probably change again, in an hour or two, sometimes in minutes! Mitts and toques or sunscreen and flipflops? Yet somehow we manage to deal with all that uncertainty.
We think we have the ability to deal with the uncertainties in Calgary and Canadian economics too. It just requires a little paying attention, a little adaptability, and a focus on local trends –not just negative headlines. Here’s our overview of economic fundamentals, as they relate to our local real estate investors colleagues and partners.
Nationally, our GDP contracted by -0.2% from April through June of 2023.
https://www.atb.com/company/insights/the-owl/canadian-gdp-second-quarter-2023/
Even though the Bank of Canada had expected growth of 1.5%, they still weren’t completely happy with the drop. How much is enough? Only time will tell. Alberta’s GDP is expected to roll in around 2.4% for 2023, and 2.2% for 2024, but I haven’t seen any updated provincial numbers. As the country heads towards recession, will Alberta continue to see humble, or even decent economic growth?
What’s happening with the people numbers? Alberta added 56,594 residents in Q1 alone! https://www.alberta.ca/population-statistics. This is a provincial growth rate of 1.2%, which compares to a national growth rate of 0.7%. “Among all provinces, Alberta still has the highest natural growth rate, the youngest average age, as well as the lowest proportion of people aged 65 and over.” Approximately one third of our population growth is from inter-provincial migration. There are lots of other stats and projections in that reference. In summary, for real estate investors: both buyers and renters are moving here, and there is economic growth to support that population growth.
Just in case you missed it, Benjamin Tal did some analysis that shed a spotlight on how Canada is measuring population demand for housing. You can read the article here: https://economics.cibccm.com/cds?id=858756bd-a8fc-4920-8ea4-e1dcd1c104d4&flag=E.
Ok, lots of demand for housing to purchase or rent—got it!
Employment numbers are always much more complex than we report, but here’s a very high level overview. Canada added 40,000 new jobs for August, with a high proportion coming from self-employment. Canada’s unemployment rate held steady at 5.5%. In contrast, Alberta added 17,700 new jobs, which is the largest 1 month increase since January. That means employment growth in Alberta is up 4.1% year/year, while national employment growth has risen 2.5% year/year. In Alberta, growth has been seen much more heavily weighted in the private sector. Alberta’s unemployment rate dropped from 6.1% in July to 5.7% in August. Edmonton’s unemployment rate is largely unchanged from 6.0% in July to 6.1% in August. And Calgary’s unemployment rate dropped from 6.3% to 5.8% month/month.
Ok, so we have people, jobs and business looking pretty good (what is that, a 3 sunshine rating for our economic weather?)
It’s probably no surprise that our real estate market is also doing well. We now have 8 consecutive months of growth in the benchmark price; it sits at $570,700, which is up 7.9% year over year. Not too shabby! https://www.creb.com/News/CREBNow/2023/September/August_sees_record-high_sales_amidst_historic_low_inventory_pushing_prices_higher/
Supply remains very tight, and isn’t showing signs of slowing yet. There is a noticeable shift towards more affordable housing options (condo/apartment/townhouse/rowhouse). And the downtown core has a noticeably smaller demand for purchase/pricing. Surrounding communities like Airdrie, Cochrane, Okotoks and Chestermere are also doing very well. Langdon and Balzac are quietly coming out of their small town slumbers as well. Olds is a bit farther north, but is expected to see more growth with the coming Lithium mining in that area.
Renting has been a bit of a shocker in the Calgary area for a couple of years now. https://rentals.ca/blog/rentals-ca-july-2023-rent-report
This report shows Calgary rents up 12.7% for a 1 bedroom, and 14.5% for a 2 bedroom. Remember, that’s year-over-year, so it’s on top of some steep increases from 2021 and 2022. People who have lived here for many years are shocked and dismayed. But as the list shows, Calgary is still number 25 for average prices in Canadian cities. We’re just really not used to it here. So the question becomes, affordable compared to what or where?
What we’re really excited about is the City of Calgary’s seeming desire to work on affordability. There was a housing needs assessment released on Wednesday of this week. AKA there is now proof that City Council needs to do something differently. https://www.calgary.ca/social-services/low-income/task-force.html Allegedly, they are so motivated that there is a special Saturday Council meeting on September 16 to discuss the housing “crisis” in the city. Maybe they listened to the community backlash after voting down the last recommendations? Maybe some measures will be put into place to allow more densification? This would have a significant impact for real estate investors.
Ah, but we all know what happens when we count those chickens too soon, right? We’ll be watching the outcome of next week’s Council meeting very closely. Anyone else ready to put in some DP’s and BP’s if things change even a little bit? Now we’ll just need to find some more trades people to help us create these homes!
