Of course, for the 'bitter renters' frequenting this blog, this would not be anything new. The key things that we have harped on in the last several months are:
- Fewer people are moving to Alberta. The people who are moving in are mostly temporary labor with no plans of buying any capital goods, leave aside any houses or condos.
- Except oil sands, there isn't much positive to write about for Alberta's economy. Province's biggest contributor- natural gas industry-is in bad shape with massive under utilization of capacity.
- Retail sales are flat after accounting for population growth and the highest inflation in our country. Of course, as the home prices fall, expect this to get a lot worse as the home ATM's become useless. Read the post I wrote on this earlier this year on how retail sales are the big driver of Alberta's economy. I think this boom was less about oil sands and more about housing and retail spending, not unlike the boom in the US.
The rental market is changing as well. Pretty much all the big guys in Alberta are offering a free December move in, along with a number of incentives. For all the talk of rapid rent escalation, there's now a desperate need of renters to pay the over sized mortgages of the landlords. Of course, the 20,000 or so multi family units under construction in Edmonton and Calgary will be dumped into these markets by this time next year and it's unlikely to improve the situation.
But for those who are contemplating buying in this market, the real fall hasn't even begun. Properties are still selling for 200 to 300 times their current rents. The rents must rise or the prices must fall. The rents aren't really rising anymore, so we know which way the prices are likely to go.
Of course, the continued problems with more banks in the US is unlikely to change the lending and risk appetite of the mortgage industry. Happy flippers in Western Canada will be in a buying spree come January 2008 and the very short 'bear market' in Alberta housing will be over.
