In a report by the Real Estate Investment Network (REIN) in early August, Calgary was ranked the number 1 city in Canada for Real estate investments. With the slower and shaky economy, the high price of home ownership, forecasts for a slowdown in housing prices increasing interest rates this has come as a surprise to many people.
So where does this type of report get its basis from? First off, the group is basing its pick of Calgary from now until 2015. So while presently it may seem less glamorous to look at Real Estate as an investment, it’s over time that it shines.
REIN bases their decision on several factors that directly affect the value of property. These key factors are population growth, job growth and increasing average incomes. Whoa, you might say! Isn’t Calgary losing population, hasn’t there been layoffs and how could average income be increasing?
This is where the long term five year view comes into play. As the global energy markets continue to stabilize over the next several years and the US continues to increases its dependency on the “dirty oil” coming directly from the Alberta oil sands, Calgary will see its economic stability ramping up. Of course as the energy industry thrives so does the rest of the provincial economy.
Although we are currently seeing a slowdown in inter provincial migration, as more jobs become available and the economy grows, this will once again turn around. Now we aren’t talking 2005/2006 out of control growth, but definitely stronger than we have seen the last three years.
Now the majority of people first moving here are not likely to be home buyers. They tend to be renters who are initially more intent on getting a good job and less concerned about buying of they are unsure how long they will stay. This is what many people who are disregarding the report are missing.
From a home owner’s standpoint, with an average price of over $450,000 for a property that may not be able to increase much is not be a good investment. On the other hand, a $300,000 suited bungalow in a rental neighbourhood that generates $2,200 a month in gross income versus a $1,070 monthly mortgage payment could be a great investment from a Real Estate investor’s viewpoint.
What are your thoughts? Is Don Campbell going out on a limb or does he have a firm grasp on what’s happening out there?
