Central Alberta's Commercial Real Estate

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Market Update - January 15, 2016

Posted on January 23, 2016 at 1:55 PM Comments comments (53330)

Red Deer sales maintained a good pace starting out the new year, actually a little higher than the same period in 2014. The pending sales count indicates that we could finish up the month as almost strong as last year too. The number of active listings is considerably higher than it was last January and is a bit of a concern. An over-supply puts downward pressure on prices.


A bigger concern is that consumer confidence may be hurt by the constant barrage of tales of doom from the media – thousands of jobs lost in the energy industry etc. Truth is, many of the jobs lost in Alberta were in Ft. McMurray and it’s likely a lot of those people were commuting to work from all over Canada. Their paychecks went home with them and the only contribution they made to the Alberta economy was the work they produced. We used to hear that there were 70,000 jobs unfilled in Alberta. Even if a lot of those jobs were energy related, some of them weren’t and have been undoubtedly filled as a result of the slack in the energy industry. While we are cognizant of the fact that people in central Alberta have lost jobs and potentially more could, we also believe that the media is only focused on the negative and that there is much positive out there if we just look for it.


The Alberta Treasury Branch’s Alberta Economic Outlook for the first quarter of 2016 offers a realistic look at what we may experience over the next 18 months. It offers hope that things will slowly begin to turn around in the middle of this year and slowly get better from there. The summary of the report is as follows:


Downturns are not unusual in Alberta’s economy, which remains closely tied to the price of energy resources. A steep drop in oil prices in 2014 – which continued and accelerated in 2015 – led to a contraction in Alberta’s GDP of about one percent last year. Unfortunately, early 2016 holds little promise of a quick rebound. Excess global supply from OPEC producers, coupled with uncertainty in China, Europe and the Middle East, continues to weigh on oil prices. This has led to even greater stress on the balance sheets of the province’s energy producers as they struggle to reduce costs. Natural gas prices continue mostly unchanged in a price range unsupportive of new investment or production.


The strains in the oil patch are also weighing down industries peripheral to petroleum extraction, particularly manufacturing and construction. As well, weaker consumer sentiment has resulted in reduced retail trade and residential housing construction. All of this has resulted in an overall deterioration in the job market.


As always, though, there remain pockets of optimism. Agriculture, forestry and tourism – which are the province’s other major industries – continue to perform well. Prospects for 2016 are positive, particularly with the weak Canadian dollar making commodity exports more attractive, and encouraging more U.S. tourism.


The Economics and Research team at ATB Financial is estimating a GDP contraction of one percent in 2015, with a smaller contraction 0.5 per cent in 2016. Most of the economic stress on the economy and labour market are expected in the first half of the year. Stability and even some return to modest growth is still anticipated by the end of the year.




August 30, 2015 - Market Update

Posted on September 17, 2015 at 11:20 AM Comments comments (137)

Sales in August slipped while the number of active listings increased slightly.  It is likely that we are now seeing the first signs of low oil prices in the housing market.  Historically, slower sales and higher inventory levels in Alberta have occurred about a year after a slowdown in the energy industry.  

The Red Deer market has finally moved into balance after giving sellers the advantage of several months.  Extremely low interest rates have been influential in our strong market so far this year.  Higher supply and lower demand will have a calming effect on prices this fall and combined with those low interest rates, will create an ideal environment for buyers who are not affected by the energy industry slowdown.

Opinions on where energy prices are going vary. Some believe that OPEC will reduce production while US oil reserves are shrinking more quickly than previously forecasted.  Others believe the price of oil will remain below $50 for at least another year.  Whatever the case, the world still needs vast amounts of oil every day and energy companies will adapt to their enviroment.  The Alberta economy does rely on a strong energy sector to fuel a "strong" economy, but we will survive this downturn the same as previous ones and come out of it stronger, smarter and more efficient.  That's what Albertans do.

November 15, 2014 - Market Update

Posted on November 22, 2014 at 12:55 AM

Red Deer Market Update – The market is moving back toward normal for this time of year on both the supply and demand sides of the spectrum although the number of pending sales suggests we could finish the month stronger than last year. There appears to be ample supply to satisfy buyers in every price range which suggests the market is balanced. While there is some concern over lower oil prices, many experts believe our economy will remain strong at least for the next two years.



More Jobs Added Last Month - Todd Hirsch, Chief Economist, ATB Financial - Alberta’s jobs market kept chugging along in October with a moderate but positive gain of 3,300 (new) jobs. But while the total number of jobs added last month was only moderate, what was more impressive was the quality of the new employment.

There was a gain of 11,800 full-time jobs, offset by a loss of 8,500 part-time jobs. This suggests that better jobs are being created than the ones that are being eliminated, or that the part-time workers are moving into better paying full-time positions.

Looking at only the monthly movements in the job market, one would be tempted to conclude that the employment situation in Alberta has been volatile. The summer months were marked with job losses—and indeed a huge drop in August. That was followed by an apparent surge in September when the province posted one of the strongest monthly gains on record.

But this volatility is probably more illusion than reality, and a reminder that it is never wise to infer too much from one month of data. Looking over the longer term trend presents a better picture of what is happening, and indeed the situation in Alberta’s job market is healthy and stable. Since October 2013, there’s been a gain of 58,500 jobs—an increase of 2.6 per cent. As well, the unemployment rate has hovered within a balanced band in the mid-four per cent range, suggesting Alberta remains one of the hottest job markets in the country.


Excerpts from CMHC Housing Outlook - 4th Quarter 2014 - Alberta is experiencing the highest regional price gains this year as sales growth is helping lift the average resale price by more than four per cent to a projected $399,000 in 2014. The average price will continue to rise but at a slower pace to $407,800 in 2015 and $417,500 in 2016.

In Alberta, MLS® sales are projected to increase about eight per cent to 71,200 in 2014. Momentum from large migration inflows and employment gains are expected to help lift resale transactions to 72,900 in 2015 and 74,600 in 2016. The movement from rental tenure to homeownership, along with rising incomes, will help increase sales as will move-up buying. On the other hand, moderating migration inflows and higher monthly carrying cost are expected to slow the gain moving forward.

The average MLS® price in Alberta is projected to increase by over four per cent to $398,900 in 2014 and rise to $407,800 in 2015 and $417,500 in 2016. Sellers’ market conditions in Calgary are projected to ease as new listings rise, reflecting an overall provincial trend. Overall resale market conditions are forecast to remain balanced over the forecast period with the pace of price growth declining through 2016.