Alberta - Canada
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Alberta heats up
 Alberta, with its vast energy resources, have been setting the economic-growth pace for the rest of Canada over the past decade. Not surprisingly, the real-estate market is booming
Published in Square Foot Magazine on October 1 2006
With the Alberta property market at an all-time high, you are unlikely to make a short-term profit on property. However, rental accommodation is in high demand, providing a good opportunity for investors wanting to buy and then rent out their properties, while their real-estate assets appreciate over the longer term.
The cost of owning a home in Alberta continued to rise faster than average income during the second quarter of this year, according to a recent report by the Canada-based RBC Financial Group. The group said incomes in the state were growing at 5 per cent per year, but house price growth was “several multiples faster”. It added that home prices in Alberta had surged dramatically, up roughly 30 per cent year-over-year in all classes. The housing market remained “extremely tight”, with “demand well above supply”. By mid-year, sales were up 22 per cent, while new listings were down four per cent compared to last year’s levels.
According to Brett Cameron, general manager of Redev Hong Kong, Alberta has been outpacing the rest of Canada for the past 10 years in terms of economic growth. “The province has been making surpluses for a number of years now and invests much of its royalties back into the community, including health care, education and housing. It has the lowest maximum tax threshold in Canada and no provincial sales tax.”
Redev deals primarily in retail property and, according to Mr Cameron, the two major Alberta cities of Calgary and Edmonton have the lowest overall vacancy rates in Canada. “This has provided for a tight retail rental market. Retailers are lining up to rent in our plazas where there is currently no space available. Rents are therefore on the rise and so are the property prices.”
Recent newspaper reports have indicated that the demand for residential housing is outpacing supply and that, with a labour shortage, houses cannot be built quickly enough to meet demand. “The growth spurt is largely attributable to the influx of investment into the growing oil-sands business,” says Mr Cameron. He adds that, with commercial property in Alberta, rental yields cover mortgage payments and provide a cash-flow of around 6 per cent.
Why
- While property is becoming less affordable in Alberta cities such as Calgary and Edmonton, these cities are still far more affordable than Vancouver, Toronto and Montreal, relative to local incomes. Calgarians in fact now enjoy a higher average before-tax household income than residents of other major Canadian cities. Edmonton residents enjoy the fourth-highest, behind Calgary, Ottawa and Toronto.
In Calgary, 21.2 per cent of household income is needed to service the costs of owning a standard condominium (the most affordable type of housing in Alberta), according to RBC. A standard townhouse is next at 26.2 per cent, followed by a detached bungalow at 34.6 per cent. A standard two-storey home is least affordable, at 36.2 per cent.
According to a recent Wall Street Journal report, the surging economy and relatively low interest rates have made Calgary “one of the hottest real-estate markets in the world”. The report stated that a 2,000-sq-ft, three-bedroom, two-bath home would have sold for between C$285,000 (HK$1,969,534) and C$295,000 (HK$2,038,401) in July 2005. A year later, that same home fetched between C$395,000 (HK$2,729,264) and C$415,000 (HK$ 2,867,455).
How
- Buying a property in Alberta can be quite complicated. Most people buy through real-estate agents, but there is also a growth in the “for sale by owner” market. While negotiating, bear in mind that the terms of the purchase contract are not set in stone. If you buy through an agent, you will probably submit your offer on a standardised contract, which is a starting point. But it is highly likely that amendments and additions will follow.
- Conditions such as your financing approval, a home inspection and a review of the property documents must be included into your purchase contract and are important to ensure that the deal will be closed and that you are buying what you bargained for. If you need to get financing, make sure that you include it as a condition of your offer to buy.
- In Alberta, you need to use a lawyer to close your property purchase. The lawyer will determine whether the property conforms to local development rules, confirm that the title to the property is properly transferred to you, review documents, make sure your money is protected against potential fraud and register and fund the mortgage and enforce the seller’s obligations.
Anything else?
The Canadian real-estate sector is a market “for all seasons”, as there is a constant flow of “new money” into the market because of the constant arrival of new immigrants. Thousands of new residents arrive in Canada every year, which means there is always a demand for real estate and an inward flow of investment boosting it. Alberta, and Canada in general, appeals to real-estate investors, because of its solid, well established market, with a constant local demand for real estate to rent or buy.
Who
Albertafirst.com
Alberta Real estate
Alberta Real Estate Foundation
Canada Homes 4 Sale
Real-estate listings Alberta
Redev Properties
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