Are You Ready For Whatever Comes Next?

ARE YOU READY FOR WHATEVER COMES NEXT?

Many of us took a little time to fill ‘er up over the summer.  Now as all the kids return to school, drivers settle into commuting routines, and fall colors are just around the corner… we have a fresh energy.  Thank goodness for that!  With all the headlines this week, it’s like we’re all back to full steam ahead—except the Green line, of course.

Here’s our monthly update for our real estate investor colleagues who like to keep a watchful eye on the economic fundamentals.

1. Canada’s GDP appears to be on the rise, or is it? Q2 GDP shows growth at 2.1% annualized, https://thoughtleadership.rbc.com/canadian-gdp/.  However, according to RBC Economic experts, “a surge in government spending accounted for 80% of the Q2 GDP increase.”  Pardon me?  Is someone cooking the books in anticipation of a possible election?  For those who are watching another metric, per capita economic output is also down … again.  (This would have been a great “peel back the onion” story from REIN a few years back. IYKYK)
2. Canada’s unemployment rate rose to 6.6% in August, up from 6.4% in July. https://www150.statcan.gc.ca/n1/daily-quotidien/240906/dq240906a-eng.htm.  22,000 jobs (net) were added (yes, nationally).  13,000 jobs were added in Alberta; however, so many more people were looking for work, that Alberta’s unemployment rose significantly to 7.7%.  Calgary’s unemployment rate is currently at 7.5%, while Edmonton jumped up to 8.6%.  Most urban centers saw increases.  Wages are continuing to rise (anyone else noticing the current strike season?); average hourly raises are up by 5% year-over-year.  Real estate investors may want to pay special attention to their student rentals: “the unemployment rate for returning students aged 15 to 24 was 16.7%, up from 12.9% in 2023.”  When combined with decreasing international student enrollment, and some new student on-campus housing (at some universities), the demand for off-campus student housing might be in for a significant shift next year.  There are already early anecdotal reports of changes for this academic year.
3. We haven’t seen more recent provincial or metropolitan population numbers, but Calgary just released their mid-year update. https://newsroom.calgary.ca/city-of-calgary-2024-mid-year-progress-update/#:~:text=As%20of%20April%201%2C%202024,annual%20increases%20in%20Calgary’s%20history.  Bottom line, the city is continuing to grow, in tougher economic times, and without an oil/gas boom.  In a recent verbal interview, Calgary’s mayor, Jyoti Gondek, reports an average of 200 people per day moving to Calgary.  ATB noted today, “based on the latest population numbers, we’ve revised up our population forecast for this year to 4.1% and next year to 2.5%.”  Those are growth projections, annually.  https://www.atb.com/company/insights/the-twenty-four/atb-economics-the-seven-september-6-20242/. 
4. Calgary rental rates are experiencing a plateau. According to rentals.ca, 1-bedroom prices increased by just 3.3%, while 2-bedroom prices increased by 2.8%, on average, of course.  https://rentals.ca/blog/july-2024-update-rentals-rent-report.  Many locals are talking about an affordability ceiling for Calgary, with anecdotal reports that people who are looking for cheaper rents are simply moving north to Edmonton.
5. As for real estate properties, the volume of properties sold took a dramatic dive year-over-year, down 20%; however, that same number of homes bought/sold is also 17% higher than the long-term trend for Calgary. https://www.creb.com/News/CREBNow/2024/September/Calgary_housing_market_sees_shifts/. Bit of a game of mental gymnastics with the stats, eh?  Essentially, the months of supply are starting to rise, and the benchmark price point has been stable for several months now.

Oftentimes, we pause here for our monthly update.  But September has started off with a bit of a bang.  Economic influencers are kind of running amok!  First, interest rates were lowered again by the Bank of Canada—and yes this means more to variable rates.  Next is the fallout:  The USA dramatically increased the tariff on Canadian lumber in August, and the first big cuts were announced this week in BC with Canfor shutting down 2 sawmills.  It is important for Albertans to remember that we process a lot of lumber here too.  Third, survey after survey is noticing that consumers continue to “feel” recession vibes, and are cautious with spending.  Fourth, Albertan and Canadian Canola producers are again in China’s crosshairs.

But the real head-shaker this week was the Provincial government pulling funding for Calgary’s Green Line.  Eau Claire is vacant.  Construction has begun at several locations.  Land appropriation is far into their negotiations, with many people already forced to relocate.  Anyone else wondering why now?  At this late stage of the project?  With federal, provincial and municipal funding at stake?  Honestly, that’s a wild card we didn’t see coming.  And it’s fascinating that Edmonton’s transit improvements are continuing to move forward, just saying.

If we’re seeking clarity as real estate investors … um…well…may we simply say, not yet?!?  Except we’re sure that everyone needs a roof over their heads—before winter!