This article was published in the Edmonton Journal on April 1 2013.
EDMONTON - Real estate guru Don Campbell has a simple message for homeowners: chill out.
Ignore all those gloomy headlines in the Toronto press about a looming Canadian housing bust, he advises.
“There is no Canadian housing market,” says Campbell, senior analyst and founding partner with the 2,900-member Real Estate Investment Network (REIN).
“At no other time in history has the real estate market in Canada been so regional,” he notes. “If you go to Hamilton, that market is strong. But in Waterloo the market is starting to slow down, even though the cities are only half an hour apart. And what’s going on in Ottawa has nothing to do with Halifax.”
Campbell’s point? Housing is a local commodity, and always will be. That’s why average house prices in Fort McMurray dwarf those in Camrose, and why average prices in Edmonton are barely half those in Vancouver.
Just because housing markets in Toronto and Vancouver are soft — a point made ad nauseum by the myopic national media — doesn’t mean the rest of the country is in the same boat.
“You see these reports saying: ‘The average Canadian real estate price is 20 or 25 per cent too high,’ and while that may be true in pockets, such as the luxury market in Toronto, it’s not true elsewhere,” says Campbell, who lives an hour east of Vancouver in the Fraser Valley.
In fact, if you’re buying a house or a condo, Alberta remains the place to be, he says, offering the biggest potential upside in the years ahead, based on economic and demographic factors.
Sure, average prices in Alberta’s two major cities are up only modestly over the past year or two, he concedes, despite the province’s population boom and sizzling labour markets.
That has some economists puzzled, as I noted in a recent column. But Campbell isn’t fussed by it. With apartment rental rates on the rise and vacancy levels shrinking, Campbell says the seeds of the province’s next housing boom are already being sewn.
“Alberta’s population is growing substantially, especially with that younger age cohort. They come out here to get a job and make $80,000 instead of $30,000 back home. And once they’re here, they discover Alberta is a pretty cool place to live,” he says.
“But it takes awhile for that to kick in, often about two years. So I’m very bullish on the direction that the market is going to be taking over the next portion of the cycle, say the next three, five or seven years.”
Campbell doesn’t issue specific house price forecasts, calling it a bit of a mug’s game, since such projections are invariably wrong. Instead, he says the most important thing is to get the direction right. And for Alberta’s two major cities, it’s clearly up.
Alberta’s population grew by nearly 116,000 residents or 3.04 per cent in 2012, almost triple the national growth rate. Yet the average price of a single-detached home in Edmonton, at roughly $401,000 in February, has yet to surpass its 2007 peak.
So what has capped the market’s gains to date? Campbell says several negative “influencers” have limited the price increases thus far, including tougher mortgage qualification rules as well as those gloomy national headlines.
In addition, some buyers who were burned by purchasing at the peak of the last cycle remain gun shy, and many recent newcomers to the province aren’t yet comfortable committing to major purchases, such as a new home.
Campbell also cites the perverse psychological effects created by Alberta’s boom-and-bust economy. The result: Albertans, more than residents of other provinces, tend to obsess about the timing of the next big bust.
“I find that when I’m speaking to Albertans they still keep bringing up the 1980s (when oil prices crashed and thousands lost their homes),” says Campbell.
“You remember when you’d see signs saying: ‘The last person to leave Alberta, please turn out the lights.’ I think Alberta is really the only province where I have those types of discussions with home buyers or investors. And I think it reflects the boom-bust psychology in the oil industry. And that spills over into the housing market,” he says.
The fear and caution that’s woven into the DNA of many Albertans contrasts with what Campbell is actually seeing in the province’s housing markets, however.
“Just look at Grande Prairie. A year or a year and a half ago there were huge vacancy rates there. And now rents are skyrocketing and there’s virtually zero vacancies in any units that are worth living in,” he says.
“I had one client, a REIN member, who had a flood and the basement had to be completely gutted right down to the studs. Yet the tenant in that property, in the basement unit, refused to move out because there was nowhere to go. That sounds like just a story, but he showed me the photos and I’m going ‘Wow this is true.’”
BY GARY LAMPHIER, EDMONTON JOURNAL
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