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Canada Is One Vast Country

If you haven’t noticed, we are one darn large country. With over 9 million square kilometres of land, almost 10 million square kilometres of total area and over 156 thousand miles of border we take up a lot of space.

This vast amount of space also comes with an impressive amount of diversity from East to West, from province to province and even from city to city. This actual diversity provides challenges some interesting for our country and due to this size, also areas of confusion when talking nationally.

We have some areas of the country dependent on manufacturing for growth. We have other areas dependent on fishing, some on forestry and of course areas dependent on energy and resources. From coast to coast, province to province and district to district these needs dependencies change and while some require others to grow, others struggle when one prospers.

This diversity causes problems when we start to see reports of what is happening “nationally”. You see, rarely there is any single event that affects every area the same. This is no more apparent in any area than Real Estate.

Real Estate Varies By Area

That is why regionally we see home prices in Vancouver breaking $800,000 on average and in Fredericton; they are just over $150,000. With such vast differences in numbers, our national “average” price is around $365,000 which means nothing if you are in the top end, or the bottom end of these averages.

Even provincially, there is disparity from one region to another. Whether it’s comparing Calgary at $413,000, approximately, versus Edmonton at $368,000 or Fort McMurray at $729,000 versus Lethbridge at less than $250,000 there are huge variances dependent on regional and local economies.

This can even be seen on a very local scale. You can often see huge differences in prices from one district in a city to the next. Of course if you live in the city, you have a better idea of why properties in Forest Lawn are less than properties in Tuscany.

Obviously there are differences and rather than continue to throw up numbers it’s time to get to the point. Whenever we talk about national averages or the Canadian statistics, we have to understand that using national numbers or trends often doesn’t equate to what is occurring in every region.

This is why the recent story of a Canadian housing bubble about to burst is more of a headline than an actuality for us. In this report, they talk about how housing valuations have lost touch with fundamentals, which translates into people over spending on properties versus their earnings, at least according to Capital Economics, the creator of the report.

Perhaps part of the problem is the majority of these types of stories come from the center of the Canadian universe (Toronto if you haven’t been told) and focus on situations in that market. As I’ve tried to point out, these types of comparisons are useless and often provide false information compared to local markets.

Alberta as a whole and the majority of the regions within the province have some extremely sound fundamentals coming into place that will cause us to be relatively insulated from what is occurring in these other “universes”.  The strength of our energy sector and the demand for energy changes the rules.

So instead of rather than comparing Canadian averages, or looking at National results, my word of advice is to see what’s happening locally and use that for the real story.

Investor’s Perspective – The Local Economy

So while it’s important to understand the values in many parts of Ontario are flat due to a slowdown in manufacturing and it’s interesting to understand that a portion of Vancouver’s higher priced Real Estate is being driven by foreign buyers, we also have to understand things are different here. Alberta was slow going into the recession and extremely slow coming out, all because our economy is different.

This is the same economy that causes us to live the boom and bust lifestyle. We watch energy prices skyrocket and drag our economy and lives along, we then see the fall of energy demand and it hits us hard.

Understanding these cycles can give you an incredible edge in capitalizing on Real Estate investments. Timing the market is for heroes and for people who are jumping on the bandwagon. These will be the same people who will buy into the Real Estate market after it’s taken off once again and then complain about what a bad investment Real Estate was for them.

Reading headlines about a “National” housing bubble gives those who study the real local economy almost an unfair advantage. While others live in fear of this pending crash now, years later they also refer to how lucky you were for buying when you did. Yes lucky, rarely smart or well informed, but rather pinning all your homework and knowledge on pure luck.

As an investor (or even a casual observer), read the headlines, understand the true impact of the story and then move forward with what works in your area. Nuff said!