Monday, May 28, 2007

View from the West Coast....

I was away the last few days due to work and visiting Vancouver and the Vancouver Islands. That they are 'building like crazy' in the Vancouver Island would be an understatement. I was in Victoria four years ago and everything was dead there at that time(much like in Edmonton). Two years ago, things had improved somewhat, but it was still pretty much the same. This time, it looked like it was Alberta!
'Now Hiring' signs appearing everywhere, KFC offering $11/hour as the starting wage, construction workers wanted ads on radios, dozens of condo building cranes, scores of new restaurants and 'tea bars' and all other artifacts of a boom.
What does Victoria really have? Oil Sands? Natural Gas? Uranium? It sure has darn good weather as compared to rest of Canada(if you can say rain is better than snow) and the belief that everyone in the world wants to live there.
It would be obvious to anyone that the economy in Vancouver islands is currently powered by real estate and construction. New construction jobs, home equity lines of credit and their multiplier effect.

Of course Alberta is different. We have oil sands. So our boom is unlikely to be influenced by any real estate only frenzy. I guess only time will tell if Alberta boom was driven more by construction and real estate spending than by the oil sands investments.

One of the things I realized in Victoria was how everything looked cheaper there. Good Thai food at the best restaurant cost at least 25% less than in Edmonton. Gas was the same price too. There is normally a 15 to 20 cent difference in the prices between Alberta and BC, but this time, there was no difference. One can't help but sense some sort of 'gouging' occurring in so many of Alberta markets, not only in real estate.

If nothing else really happens, may be the Alberta bubble will deflate on its own when people start moving away from here. Two years ago, it would have been fatuous to compare costs of living between Edmonton and Victoria. Right now, Alberta advantage has all but disappeared and you can actually get pretty close cost of living numbers between Edmonton and Victoria. And we have not even started comparing Edmonton and Calgary to Toronto, Montreal and Ottawa. Alberta may end up as a victim of its own success.

In the mean time, inventory has been climbing at a frenzied pace in both Edmonton and Calgary. Calgary's inventory is now above 6000 in the MLS system plus at least 1500 to 2000 in the other systems (welist and comfree) .

In Edmonton, I don't have the MLS numbers, but the comfree numbers that I track have gone up from around 1000 to 1600 in this month alone. MLS should not be too different. We'll see the official release in the next few days.
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