MOVING THE GOALPOST
Do you remember the book, “Who Moved My Cheese?” –by Dr. Spencer Johnson? Hint: It goes all the way back to 1998, when we were all still worried about Y2K. It’s a story about the search for “cheese” (whatever rewards we are pursuing, or in some cases a deeper quest for our “why”). The main conflict in the story is change. And the purpose of the allegory is to inspire the reader to anticipate and adapt to change, maybe even enjoy it? It was a New York Times bestseller for almost 5 years! We think it may be ridiculously appropriate yet again, especially for real estate investors.
In an effort to honour the original author’s concept, we have modified the comparison to “moving the goalpost.” This week we heard back from the City of Calgary about a permit we had submitted. It meets all of the city bylaws, setbacks, etc…, so the city says yes, BUT Enmax says no. I’m not kidding. Because of a powerline that is metres away, in the alley, nowhere near the property line. Hmmm! Who moved my cheese?! (FYI: In pursuit of the “cheesy” permit, we are exploring solutions.)
This monthly update of Calgary and Alberta’s economic fundamentals gives respect to the uncertainty that surrounds the path forward for real estate investors.
GDP: Canadian GDP numbers were released on October 31, 2024. For a review, Q1 saw a growth rate of 2.2%, Q2 saw a GDP growth rate of 2.1%, but then June’s GDP numbers were 0.0%, July was 0.1% and August was 0.0%. https://www150.statcan.gc.ca/n1/daily-quotidien/241031/dq241031a-eng.htm. Bring it all together so far and Canada’s GDP looks like an annualized rate of 1.3%. https://economics.cibccm.com/cds?id=b468a0a0-a503-4a65-a948-c827691ce313&flag=E. September has an advance estimate of 0.3%, suggesting that the final month of Q3 improved, but we’ll soon see. As for Alberta’s GDP, revised provincial numbers showed that Alberta’s GDP for 2023 was 2.3 % (previous estimates had pegged it at 1.5%). https://www.atb.com/company/insights/the-twenty-four/provincial-gdp-by-expenditure-fall-2024/.
Jobs: Employment data was released today, https://www150.statcan.gc.ca/n1/daily-quotidien/241108/dq241108a-eng.htm. Overall, Canada’s unemployment rate is unchanged at 6.5%, Alberta’s unemployment rate improved slightly from 7.5% in September to 7.3% in October. Calgary’s unemployment rate worsened slightly from 7.4% in September to 7.7% in October. Edmonton has the unfortunate ranking of second highest unemployment in the country, but their rate improved slightly from 9.0% in September, to 8.6% in October. Here’s a fun stat for you: Canada added roughly 15,000 jobs –of that, Alberta added 13,000 jobs! “Alberta employment bounced back last month, rising 13.2K following a 7.6K decline in September and leading all provinces. Digging deeper, job gains were concentrated in the private sector (22.1K) and in full-time jobs (8.2K).” “Alberta’s job growth so far this year is 3%—ahead of the national average of 1.7%.” Small business is rocking it in Alberta! https://www.atb.com/company/insights/the-twenty-four/labour-force-survey-october-2024/.
Population Growth: Just for fun, have you checked out Canada’s “real time” population clock? https://www150.statcan.gc.ca/n1/pub/71-607-x/71-607-x2018005-eng.htm. Alberta appears to be very close to topping the 5 million mark, if this clock is accurate? The most recent population data we can find is here: https://interactive.atb.com/economic-outlook-oct-2024. And the current wildcards are 1) Canada’s new immigration targets https://thoughtleadership.rbc.com/how-canadas-new-immigration-targets-will-impact-the-economy/ and 2) Will the new Trump presidency lead to a large increase in refugees (and/or deportations) from the USA or a noticeable increase in Americans moving to Canada? Here’s one opinion, https://rentals.ca/blog/trump-victory-sparks-renewed-interest-in-americans-moving-to-canada.
Rentals: Overall Canadian rental rates have decreased in October, https://www.canadianmortgagetrends.com/2024/11/national-rent-prices-decline-year-over-year-for-first-time-since-pandemic-report/. The bottom line is that Calgary’s rental rates have seen decreases of 4.3% for 1 bedroom, and 7.0% for 2 bedroom while Edmonton’s rental rates are rising by 7.8% for 1 bedroom and 6.7% for 2 bedroom. It should be noted that these are year-over-year stats. Take a closer look for the month-to-month changes here, https://rentals.ca/national-rent-report. Anecdotal reports throughout Calgary show a softening rental demand.
Real Estate: Clarity? Not this month. Even the experts have differing opinions. Benchmark pricing has decreased for the 5th consecutive month. But sales volume was up in October –this is an unusual time of year to see sales improve. Inventory is up 55% year-over-year, but don’t panic as months of supply are still only 2.28. Technically, Calgary is still in a seller’s market, because 2.5 months of supply is the cutoff to say it’s a balanced market. Bottom line appears to be that homes are still selling competitively at the lower price points, but there is room to negotiate at the higher price points. https://www.creb.com/Housing_Statistics/documents/10_2024_Calgary_Monthly_Stats_Package.pdf. Oh yes, and as for the increase in land transfer fees that started Oct 24? No one seems to be blinking about that one. https://www.abmunis.ca/news/casual-legal-land-titles-fee-increases.
As we move forward with new construction in Alberta, real estate investors may want to pay attention to rising construction costs. “Year over year, construction costs for residential buildings rose 4.0% in the 15-CMA composite in the third quarter of 2024.” https://www150.statcan.gc.ca/n1/daily-quotidien/241105/dq241105c-eng.htm. Calgary’s residential construction costs went up 1.3% in Q3 alone. We’re not sure if this includes rising Builder’s Risk insurance, due to the volume of fires in new builds, especially in Edmonton.
So what’s an investor to do? Well, the cheese or the goalpost has already moved. Complaining won’t change that. We’re excited by Alberta’s job growth and the diversity of jobs we’re seeing in the announcements. https://majorprojects.alberta.ca/#/. So we’re navigating the changes, problem-solving and adapting to all the influencers and fundamentals. Bottom line: our financial freedom still matters!
