Alberta Real Estate
This is Bob Holm’s & Paul Falkowski’s opinion regarding Real Estate
in Alberta. This opinion is based on extensive research in a variety of areas,
but is still just an opinion. Please verify all information and make your own
conclusions.
"We believe that there is very little chance in our life of finding any
place at any time that has better potential as a real estate investment than
Alberta does for the next couple years, particularly the hot zone defined
below." Bob Holm & Paul Falkowski Mar./03
Alberta’s Hot Zone
The hot zone is denoted on the map by the red shaded area. The green shaded
areas represent Banff & Jasper national parks. Many areas in Alberta outside
the "Hot Zone" are going to experience significant growth. In
addition, some areas inside this zone may experience nominal growth or may even
contract. However, I believe that there will be a high concentration of
communities that will experience significant growth in the next decade within
this area. Particularly, centers over 4,000 in population. The critical elements
of this area are Alberta’s two major cities as well as migration south and
west towards Alberta’s primary recreational areas.
Critical Factors
There are four primary trends that will influence numerous countries across
the world and many province specific factors. The four primary trends are:
The baby boomer’s wealthiest years
The echo generation’s migration from home
The industrialization of a huge portion of the world’s population
The information revolution in technologically advanced nations
1. The Baby Boomers Wealthiest Years
There are three current trends that are putting enormous wealth and
disposable income in the hands of the baby boomers:
The baby boomers are in their peak income earning years. An individual’s
peak income is earned from their early 40s until they retire. Note: if a
person was born in 1946 and retires when they are 65 they will retire in 2011.
This enormous income stream will start to dissipate between 2010 and 2015.
The boomer’s children are starting to leave home. The baby boomer’s
disposable income will rise as their family expenses diminish.
The baby boomer’s parents, the children of the great depression, who have
generally saved their entire life are passing enormous portions of their life’s
savings on to their children, the baby boomers.
The baby boomer’s will have enormous wealth and disposable income for the
next decade. In economic terms, the baby boomer’s only have two options for
this money. They can spend, or they can invest. The baby boomer’s have proven
in the past to be spenders. However, imminent retirement will force a portion of
this money into investment.
Spending – When the boomers spend they push more money into the
economy which in turn filters through the economy several times resulting in
strong economic growth and further spending. One primary driver of real estate
value is the income of the population in the area of the real estate.
Investment – The majority of boomer investment prior to retirement
will be in higher return equity investments like the stock market and real
estate. In any market, if demand increases for an investment, and supply is
constant, then the value of that investment will go up.
Regardless of whether the baby boomers invest or spend, they are going to put
upward pressure on real estate values.
"The one thing that will drive real estate values up higher and faster
than anything else is a larger household income." David
Baxter Ph.D., Demographer
"The tail end of the Baby Boom generation, along with the children of
ageing boomers and new immigrants to Canada, will keep the residential real
estate market strong over the next 10 years", Financial Post,
December 12, 2001.
"A growing abundance of affluent shoppers is fuelling a retail building
boom in Calgary, says a new report" The Calgary Herald, Apr, Mar
2002
2. The Echo Generation’s Migration from Home
The baby boomers children are leaving home and creating demand for housing.
The primary impact is on rental housing although some are buying their own
homes. In Harry S. Dent Jr.’s book, The Roaring 2000s Investor, he suggests
that echo generation demand for rental housing will start to climb in 2001 to a
peak in 2015 and then decrease until 2029. While this bulge is not as compact or
pronounced as the baby boomers it’s reassuring that the demand is going the
right direction until 2015. The most interesting thing in Canada is that there
are only two provinces that can boast a prominent echo generation, namely
Alberta and British Columbia. When I see how much people pay to see Harry S.
Dent Jr. speak live, I feel very comfortable with the quality of his
information.
"But Canada has no significant echo baby boom to follow, except in
British Columbia and Alberta, where the future of Canada’s growth clearly
lies." Page 105, "The Roaring 2000s Investor", Harry S.
Dent, Jr.
"One of the best selling Canadian books of 1996 claims the population of
Canadians under the age of 15 is some 772,000 fewer than it was 30 years ago. If
that is correct, it is just as important to understand that Quebec has 552,000
fewer, Ontario some 10,000 more, but that BC and Alberta have some 274,000 more
young people under the age of 15 than they did 30 years ago." Page 31,
"Forget about Location, Location, Location" by Ozzie Jurock.
The above comparisons are against 1966, or the end of the Baby Boom. It’s
easy to see why the future of Canada’s growth clearly lies in Alberta and BC.
3. The Industrialization of A Huge Portion of the World’s Population
Huge portions of Asia, primarily China and India are just entering the
industrial revolution. This industrialization of at least 1/3 of the world’s
population is going to increase demand for oil and gas substantially for the
next 20 years.
"A panel of U.S. experts warned yesterday that global energy demand will
grow by 50% in the next 20 years… The report three years in the making, was
released yesterday, by the Washington, D.C. based Center for Strategic and
International Studies. The center warned that at some point developing
countries, led by China, will begin to consume more energy than the developed
countries." The Edmonton Sun, February 15, 2001.
"Of the 2.5 trillion barrels that are in the ground, 300 billion barrels
are recoverable at today’s technology… Luckily for Albertans, the only
oilsand deposits in North America are in our province" Edmonton
Journal, March 3, 2001.
"The Fort McMurray Region is home to $86 billion worth of oilsands
projects already announced or in the planning stage – and the total is growing
daily" Edmonton Journal, March 15, 2002.
4. The Information Revolution in Technologically Advanced Nations
Harry S. Dent made one of the most amazing comparisons that I have ever seen.
|
Revolution |
Catalyst |
Result |
|
Industrial |
Assembly Line introduced in 1916 |
Roaring 20s |
|
Information |
Internet introduced in 1995 |
Roaring 2000s |
It’s difficult to predict the timing & economics of the information
revolution. However, the information technology sector is and will continue to
be a huge growth sector. At this crucial apex of the information revolution,
Alberta is putting itself on the map. Calgary was recently voted the most
intelligent community in the world. Furthermore, the Alberta government is
installing a high-speed communications network known as the Supernet, province
wide.
"Calgary’s high-tech community received a much-needed boost Thursday
after an influential, U.S.-based telecommunications group voted the city the
world’s most "intelligent" community… Recently, Calgary was cited
by Boyd Co., a U.S. consultant, as the most affordable North American city in
which to operate a high-tech firm… Of the new jobs created in Alberta, some 50
per cent are technology-based, Bronconnier noted." The Calgary
Herald, October 25, 2002.
"Calgary has "compelling advantages" for U.S. high-tech firms
looking to relocate or expand, according to a leading U.S. corporate location
specialist." The Calgary Herald, April 12, 2002.
"Alberta will lead North America when it completes it’s plan to link
it’s 420 municipalities with the installation of high speed fiber optic
cable" Calgary Herald,
October 26, 2000
"It is not a goal or an incentive of the SUPERNET to provide incentive
for high-tech workers in the major centres to locate in rural areas, but really
a positive spin-off from the SUPERNET. This will help to make it possible for
high-tech workers or businesses to choose where to locate. While some factors
may still apply for some businesses to see the need to locate in major centres,
we believe a great many will be able to operate not dependant on location.
E-commerce will be seen as a reality for some to carry on from wherever they
are." SUPERNET press release 2001
5. Other Important Considerations
Alberta remains one of the best places in Canada to make money… Alberta
easily has the most receptive business taxation regime in the country, said
Clemens, director of fiscal studies for the free-market think-tank. Alberta
doesn’t have a provincial sales tax and is the only province without a
provincial corporate capital tax, he said." The Calgary
Herald, May 7, 2002.
"Edmonton can add another arrow to its competitiveness quiver – second
lowest operating costs in Canada… the report is the latest in a series of
professional studies that show Edmonton’s one of the most affordable major
cities in North America." The Edmonton Journal, May 14, 2002.
"While Edmonton eyes the spin-off benefits of $60 billion of oilsands
development and boasts the lowest business operating costs of any major city in
the world (according to a recent KPMG survey)" The Edmonton Journal,
May 24, 2002.
The above reporter wasn’t exactly correct. Edmonton was determined to be
the cheapest city in the G7 nations as opposed to the world.
Rental Vacancies on the Rise
|
Apartment Vacancy Rates by Market |
|
Area 2001 2002 |
|
Edmonton CMA 0.9 1.7 |
Recently a major U.S. magazine commented about all the money "pouring
into China" and quoted $50 billion in proposed investment. With a
population of 1.3 billion, that equates to just under $40 per person. CMHC at it’s
Nov. 6, 2002 Housing Outlook Conference showed a graph of proposed capital
investment for Alberta, with $38.3 billion in the Fort McMurray area and $27.2
billion in the rest of the province for a total of $67.5 billion. Given that
Alberta has a population of approximately 3 million people, the capital
investment equates to $22,500 per person. I think better in terms of millions,
so I like to equate $67 billion to 67,500 million-dollar projects in the
province.
The average house price increase in Alberta was
11.6% for 2002, and housing affordability is still among the lowest in Canada.
This tells us that even with a 11.6%
increase in house prices our average income is growing and will continue to
grow
at a rate to support these increases. The #1 economy in Canada with the 3rd.
lowest
housing affordability.
"The price of single-family dwellings has risen an average of more that
$ 105 a day since the end of 2001". The Calgary Herald, July 5,
2002.
There are many more quotes and details that support investment into Alberta
real estate. Research the above information and look into the real facts about
the future of Alberta real estate.
What are the Results
"Alberta population growth led all provinces in 2000-2001 for the fifth
straight year, reflecting the province’s leading economic performance,
Statistics Canada said Tuesday." The Calgary Herald, October 27,
2001.
"Nearly 250,000 people moved to Alberta from elsewhere in Canada in the
past five years, according to 2001 census data released by Statistics
Canada" The Edmonton Sun, December 11, 2002.
Alberta economy set for 5% growth: RBC
"We’re upbeat on Alberta right now. RBC is forecasting economic growth
of 4.8% for Alberta in 2003". The Calgary Herald, January 9, 2003
Alberta Set to Boost Diamond Exploration
"If we spent five per cent of the time we spent developing oil and gas,
we would have an industry in the province that’s second to none". The
Edmonton Journal, February 2003.
Totalfina Aims for Big Role in Oil sands
"TotalFinaElf is looking at building an up grader in Alberta to get full
value from the resource. TheSurmont deal represents Paris-based firm’s first
major move in Canada" The Financial Post, January 8, 2003.
"Canada has an out of the Kyoto protocol if it wants to use it, says a
University of Alberta Professor". The Edmonton Sun, December 12,
2002.
Ottawa Improves Kyoto Climate (NO IMPACT)
"The federal governments proposals include flexible, reasonable
reduction targets for the oil patch that allow for industry growth. This will
allow the industry to continue growing, ensure Alberta’s economy stays strong
and help secure supplies of oil and gas for the country". The
Edmonton Journal, December 21, 2002.
"Suncor Energy and Shell Canada have long anticipated the Kyoto targets
and are pursuing policies that aim to reduce their greenhouse-gas emissions.
"We’ve been taking action on climate change since 1994, before there was
a Kyoto. "We have a path that we’re going to continue on, regardless of
the Kyoto debate". The Edmonton Journal, December 16, 2002.
Will this growth continue? Due to all the above factors I believe the
greatest growth is still to come. We are currently purchasing single family
homes and apartment buildings in key locations that will maximize return on
investment. I’m also looking for joint venture capital for these investments.
If you’re interested in hassle free, high return real estate investment
opportunities please contact:
New Dimension Investments Inc.
Office 780-460-1021
Fax 780-401-3544
Bob Holm
Paul Falkowski
Cell: 780-916-9032
780-722-0624
Email: bob@newdimensioninvestments.com
Paul@newdimensioninvestments.com
Special Thanks
Thank you to the Alberta Real Estate Investment Network (R.E.I.N.) group for
supplying a major portion of the information and insight in this report. As a
member of the R.E.I.N. group, I would highly recommend it as an excellent source
for further research regarding Alberta Real Estate. If you are interested in
learning the various skills required for investing in Real Estate, I highly
recommend that you contact and become a member of the R.E.I.N group at:
www.albertarein.com
Tel: (403) 208-2722
Toll Free: 1-888-824-7346
Fax: (403) 241-6685
