Tuesday, February 27, 2007

China Effect

Chinese stocks dropped by more than 9 per cent yesterday raising concerns about the growth in China. If growth in China is being questioned, the growth in consumption of commodities must also be questioned. If Oil is the big story for Alberta Real Estate, growth in China and India is the big story for Oil (along with usual middle eastern unrest).
Already, they are talking about impact on Canadian commodity based stocks.
What does this have to do with Real Estate in Alberta. A lot or nothing, depending on your perspective. Alberta is priced for perfection, so to speak. And unlike a company whose stock is priced for perfection, Alberta has very little role to play in how the story will unfold. If demand in China were to soften and (if hell doesn't freeze over) oil falls to $30, what will happen to Alberta real estate?
Since $30 oil is now dismissed in Alberta as unlikely as a flat earth, this could be the Achilles' heel for Alberta Real Estate bulls. I'm not saying it is going to happen, but lower oil price as a risk factor is not on any one's radars.
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