Last week DLC Regional Mortgage Group invited an economist from the mortgage insurer Genworth. He spoke of the positives and negatives of our economy.
The G20 market economies are puttering along in a state of slow growth as the U.S. middle class consumer isn’t feeling much effect from the growth that they actually have. Their job growth since the last recession is sluggish at best. In Canada we’ve been fortunate to not have had the downturn that they did, but our economy is so closely tied to the U.S. that our national growth is being impeded by the effects down in the states.
Alberta on its own is extremely strong, but we aren’t without any risks.
Lately, we’ve all heard of the pipeline requirements we need to move our product to market. Without that pipeline being completed, oil and gas companies are finding other solutions to get it to market. That solution is rail.
With all of these new plants coming online in Fort McMurray, the flow of oil is going to double in the next 10 years, but without new pipelines in place, this is going to create a huge bottleneck. A few short years ago, 10,000 barrels a day were flowing on rail, whereas today up to 170,000 barrels a day are being a shipped.
This current bottleneck is also costing our oil companies $30/barrel as we have difficulty getting it to market. This is more a short-term (2-5-10 years, considering there’s over 100 years of oil up there) issue though as pipelines going east, west and south come online.
For 2013, there is over $48 billion of continuing investment; with the next few years looking just as strong, as long as the price of oil stays in the $80+ per barrel range.
That being said, if the price of oil was to dip, the comeback will likely be strong, just like it was in the 2009 dip as oil dropped to $33/barrel, and quickly returned to over $80/barrel within 12 months.
To date, Albertans have both been buying up existing homes at a pace of 13.9% above 2012, and housing starts are 27% above the same time last year.
With 58,000 new jobs created in 2012, we needed more population to fill those needs, and people came! And are still coming!
The past two years Alberta has seen population increases over 100,000, and we are on the same pace this year. Much of the population moving to Calgary, Edmonton and Fort MacMurray, but Red Deer hasn’t been a slouch either, with just the City alone growing in the 8-10% range over the past few years.
With house prices increasing, one wonders if this is sustainable as affordability issues arise. The average annual household income in Alberta is $127,000 while the rest of Canada is at $81,000 while Fort McMurray rolls in at a whopping average of $190,000.
The Alberta Advantage, coined long ago, is still going strong, and looking to be so for some time to come. With interest rates as low as they are buying a home of your own in Alberta bodes well for you and your family.
Jean-Guy Turcotte is a Mortgage Broker with Dominion Lending Centres-Regional Mortgage Group.