Alberta has been riding high on its horse for awhile now. And really, who can blame the province for its exuberance? When you have the kind of oil they do, and the subequent growth, it's easy to see why Alberta has been the envy of many provinces for some time. Drawing in workers from all parts of Canada and abroad, it's been the fastest growing province per capita over the past ten years, and it still manages to keep its books relatively balanced, at least as far as Canadian provinces go. Though it does have a debt of $7.7 billion, it is nothing compared to Ontario's massive $281 billion debt. These happy times have led to real estate and population booms in both Edmonton and Calgary. Though prices are not as high as here in Toronto, the increases have been huge over the past 20 years in the Prairie provinces.
Of course, the good times have taken a bit of a pause in Alberta with the falling oil prices as of late. Jobs are slipping away, and real estate sales volume is at its lowest point in seven years. Some believe it is in an early stage of a correction.
As we have seen across Canada, a change in the demand for Alberta oil can effect things on a national level. Take, for example, the value of our dollar. Alberta oil has played a large part in bringing the dollar's value down across the country. So, would this mean that a slip in Alberta real estate prices could cause a domino effect in the rest of the Canada's provinces?
I think the short answer, in my humble opinion, is probably not. The fact that the dollar has slipped creates better opportunities for provinces like British Columbia and Ontario. Ontario manufacturing can now sell its products internationally at a lower price making us more competitive.
Of course, it could be a tipping point for the rest of the country if a certain amount of fear gets injected into the national consciousness. Real estate is run on emotion, despite the numbers behind it.
National real estate crashes are possible. Everyone remember the U.S. during the last decade. Prices fell an average of 30% across the country, much higher in states like Nevada and Florida.
Canada could have a correction is real estate, but it would require, in my opinion, a big change in the interest rates or major changes in the world economy. A sharp increase in interest rates would likely pause the real estate market across the country, and in some cases, lead to a fall in price. The thing is, rates will only go up if the economy of the country is undergoing strong growth, but with oil down, that's not the case.
The dropping oil prices in Alberta have had the opposite effect. Interest rates are lower now than they were last year making the interest costs on your mortgage lower this year than last year for the same priced home. Foreign investors are now seeing that Canada's low dollar may be an opportunity to get in on this market while the dollar is down, though some may be waiting for the dollar to bottom out.
The first few months of this year have shown me that the price increases here in Toronto are similar to last year. It's a seller's market for the most part. Our Toronto real estate market is currently affected more by specific local factors than by national ones. There is a shortage of houses in this city. So, house prices, and condo townhomes are increasing in value more than larger condos. Certain emerging neighbourhoods are attracting more buyers who are priced out of established neighbourhoods. Transit, or lack of it, is determining where people will live. A well-built, well-run condo in a well-planned neighbourhood will do better than one that is not.
All in all, the cities of Alberta run a much stronger boom/bust cycle because their economy is tied to the resource sector. Luckily in Toronto, we have a diversifed economy that is not tied too much to one thing, and our steady appeal to immigrants from all over the world will keep the city growing and the real estate market healthy without the massive explosions of growth followed by a bust, like Alberta.