SHOULD I, OR SHOULDN’T I?
To invest in real estate, or not? This is a much more complicated question in 2023 than it was in the previous decade. Experienced investors systematize their answer and go back to the fundamentals each time they consider a new property, or a new area. Conveniently, today is our weekly update on the fundamentals for the Calgary and Alberta markets.
It all starts with macro-economics (GDP), but let’s keep it short and sweet here: National economic output in August was flat compared to July (which was also flat) and the preliminary estimate for September is for another month of no growth. https://www.atb.com/company/insights/the-owl/canadian-gdp-august-2023/. What that means to Canadians is that we’re waiting for the statistics to confirm “recession” status, but at best our economy isn’t growing much, if at all. In contrast, the Alberta government is predicting that our GDP will grow by 3.0% in 2023, https://open.alberta.ca/dataset/9c81a5a7-cdf1-49ad-a923-d1ecb42944e4/resource/0759de1b-8dd4-4cbb-a915-950aaa1bb51d/download/tbf-2023-24-first-quarter-fiscal-update-and-economic-statement.pdf (start on page 16 for the economic overview). Yes, it’s a government document, with inherent bias, but the point for real estate investors is that Alberta is undeniably in growth mode. In comparison, ATB Financial forecasts GDP growth in Alberta will be 2.7 per cent this year and 2.0 per cent in 2024. (see Calgary Economic Outlook, just released yesterday https://www.calgaryeconomicdevelopment.com/…/2024…/).
Canadians are well known to go where the jobs are, so let’s look at that next. Canada’s unemployment currently sits at 5.7%, up from 5.5% in September. Alberta’s unemployment is 5.8%, up from 5.7% in September. Calgary’s unemployment number dropped slightly to 5.8% in October, from 5.9% the previous month; Edmonton is stable at 6.0% unemployment for both September and October. In this wacky world, Alberta lost 38,000 jobs in September, but gained 38,000 jobs in October. As for affordability, Alberta continues to have the highest weekly wages of all the provinces, at $1332/week https://www.atb.com/company/insights/the-owl/atb-economics-weekly-wrap-november-3-20232/. We think that another very interesting number is that Canada’s working age population has grown, on average, by 81,000 people per month, so far in 2023.
Next stop on the basics bus tour is always people. Alberta’s population is now forecast to grow 4.4% in the 2023 census year, up from the budget forecast of 2.9%. This will be the fastest annual population growth since 1981. https://www.alberta.ca/economic-outlook. Third quarter migration and population numbers are not yet available, but it is very clear that Alberta is breaking its old demographic, in-migration records https://www.atb.com/siteassets/pdf/company/insights/outlook/alberta-economic-outlook-september-19-2023.pdf.
As far as the basics go, Alberta and Calgary have economic growth, jobs, and an increasing population. It should surprise no one that rents have risen. In the October report from Rentals.ca https://rentals.ca/national-rent-report, we see that Calgary rents have risen 13.2% for 1 bedroom and 13.6% for 2 bedroom, compared to the previous year. Overall, rents in Alberta are up 15.3%, according to their data. Anecdotal reports of rental increases in Calgary and in Alberta vary wildly. What this means to real estate investors is simply that we’re seeing strong demand for rental housing (lots of customers!).
Which brings us to the real estate market, where the big story is … supply, again. Calgary is currently seeing 1.47 months of housing supply overall, which is down 29.9% year over year. Sales are slowing compared to previous months, which is normal at this time of year; however, sales are still higher than last year by 17%. The benchmark price in Calgary is up 9.7% year over year to $571,600. https://www.creb.com/News/CREBNow/2023/November/Price_gains_continue_in_Calgarys_real_estate_market_as_inventory_remains_low/.
The basics can also include interest rates (have you heard enough about that lately?), inflation (ditto), consumer confidence and business confidence. We haven’t even touched on the recent local, national or international politics either! Rather than overwhelming our colleagues, we aim to provide a simple, high-level snapshot; then everyone is free to dig deeper or add to their knowledge wealth at any time.
Our point with these monthly updates is simply to share local knowledge and statistics for our colleagues thinking about “maybe” investing in Alberta. The fundamentals are currently VERY strong. Your next mission, should you choose to accept it, is to dial down into specific neighbourhoods or properties where the specific numbers of those deals may, or may not, work for your portfolio and more importantly for your long-term financial freedom goals.
Connect with us anytime to chat more @MtnEdgeDevelops.
