Thoughts on Edmonton’s Economy
These are interesting times for economics enthusiasts. Staying current with economic data reports and news stories from Canada and the US seems like a full time job.
Crunching economic data, making sense of it, and then making predictions is complicated and time consuming. I feel it is important to stay on top of the economy, but my first priority are my real estate clients, so I will resist the urge to get too deep into economic theory.
The other day, my attention was brought to an article in the Globe and Mail which painted the economic picture in B.C. and Alberta as catastrophic. I could talk about the blatantly biased tone of the article but what is more disturbing is information that is left out of the article.
The authors report:
“In Alberta, personal bankruptcies soared by 27 per cent year-over-year in the 12-month period ended December, 2008, the Office of the Superintendent of Bankruptcy Canada said yesterday. That was nearly double the 14-per-cent increase for the entire country.”
Wow, sounds bad.. right? Well something didn’t feel quite right about that stat - they didn’t give any absolute numbers. So I thought I would check it out at the source. (See Table 3: Bankruptcies filed by consumers). So here’s the thing: Anytime you start with a small number, it takes a smaller absolute increase to equal a large percentage increase, than it would if the base number was large.
I thought I would compare apples to apples so I decided I would determine the Per Capita Bankruptcy Rate for Alberta and Ontario and then compare them.
What I found was that for the year ending December 2008 even after Alberta’s bankruptcy rate increased for the year, if the populations of both provinces were equal Ontario still had 65% more bankruptcies than Alberta (remember this is per person). Based on recent population numbers, the percentage of the population who filed for personal bankruptcy was 0.2785% in Ontario (36,200) and 0.1685% in Alberta (6,066) for 2008.
Although personal bankruptcy is a terrible experience for the person (and family) of those going through it, my opinion is that employment has a much more significant and widespread impact on an area’s economy.
Based on the latest monthly job stats, Alberta lost 200 jobs while Quebec lost 26,000 and Ontario lost 71,000 (the largest drop in more than three decades). Edmonton in contrast has one of the lowest unemployment rates in Canada at 3.6%.
Prosperity is relative. In the past as other regions of the country have struggled, workers have moved to Alberta for better job prospects.
Is it possible this might continue?
Current Edmonton Condo Developments Move Forward
It depends on who you ask. First time home buyers have welcomed the drop in Edmonton condo prices we’ve seen over the past year and a half; condo speculators not so much. Then there are others on the sidelines who look to the Edmonton real estate market as a signal of the economic health of the capital region.
Earlier today the Edmonton Journal reported that despite the less than ideal market conditions, Edmonton condo developers are confidently moving forward with projects that are under construction, despite cancelled projects in Calgary, Canmore and Kelowna.
So what does this mean for these three groups of condo-watchers?
First, the potential condo buyer:
Its no secret that tens of thousands of young people have moved to Alberta over the past 3-5 years. Most people who moved to Alberta came here to find better jobs with higher wages. I would argue that in most industries Edmonton has higher wages than even Toronto and Vancouver. While there have been no shortage of good paying jobs the past few years, many first time home buyers who relocated to Alberta several years ago got priced out of the real estate market when prices soared in 2006.
These people have been renting and saving up for a down payment so they can buy their first home. The majority of first time home buyers in Edmonton turn towards condos because of affordability and lifestyle. For these first time home buyers the news that current condominium developments are moving forward is good news; it means condo inventory levels will remain high, giving buyers lots of choice and leverage when negotiating the purchase price, the timing of possession, and other points on the purchase contract that are specific to each transaction.
Second, condo sellers:
The news isn’t so great here. With a large inventory of condos on the market in Edmonton for buyers to choose from it will continue to be difficult for sellers just to get buyers to look at their condo let alone make offers at last years prices (which is where some sellers still have their condos priced). The best strategy is to have your condo marketed effectively and priced competitively so it can stand out from its competition.
Those who are selling to move to a single family home or relocate to another city will able to cancel many or all of the effects of higher inventory and lower condo prices, by benefiting from the same factors when they go to buy since most real estate markets across Canada are facing similar environments. Those who bought a new condo in Edmonton during the price run-up with the intent to “flip it” are in a tougher position. If it is sitting vacant they have the dilemma of whether to rent or sell.
Finally, the Observers:
With condo developments “put on hold” else-ware in Canada, and the constant barrage of doom and gloom in the US and international media, having Edmonton condo developers continue their projects shows that they are confident in the economic stability of Edmonton.
Yes, oil prices are down, but people around the world haven’t hung up the keys to their car yet. Experts continue to say that Canada is in strong position compared to other countries. And Edmonton continues to offer strong job opportunities, in the face of manufacturing lay-offs in Ontario and Quebec.
Relative to the rest of Canada, and the rest of the world - Edmonton is a pretty good place to be.
Article by: Nathan Mol, Coldwell Banker Johnston Real Estate
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