In a research note released today, BMO Economist Robert Kavcic compares the differences in Alberta’s economy and real estate market from 2006/2007 to today. Here are his key points:
Alberta Jobless rate: 4.7% vs. 3.0% in Oct-2006
The labour market has tightened dramatically, but is still a long way from conditions seen in 2006, when vacancies abounded and wage growth was much hotter. Since then, 350,000 migrants (international and from other provinces) have helped relieve the strain
Calgary House price index: +9.5% y/y vs. +60% y/y Aug-2006
A sudden population surge had homebuilders behind the curve last decade, which propelled rents and prices skyward. While both are accelerating again, the large number of homes started late last cycle, plus the recession’s impact on demand, has the housing market in much better balance, even if it is tightening quickly in Calgary.
Calgary Office vacancy rate: 9.4% vs. 1.0% in 2006Q4
Similarly, the commercial real estate market is much better supplied now thanks to a host of major projects started late in the prior boom—think of the Bow Tower that opened last year. As a result, we’re unlikely to see anything close to the scant 1% office vacancy rate that plagued the economy in 2006 and pushed up rents.
Calgary Non-res. construction prices: +1.6% y/y vs. +21.4% in 2007Q1
A better skilled labour supply and less upward pressure in broader input costs have construction costs outside the residential sector growing at a much cooler pace. In the oilsands, labour remains an issue, but natural gas prices are still below 2007 levels and other materials prices (steel, etc) have ebbed.
You can download the entire report here
For more examples of the differences between Calgary’s resale market today compared to 2006, check out a couple posts from earlier this year: