Why is Alberta Real Estate Investing Smart? Alberta Real Estate Investing is one of most promising provinces for buying rental properties. With its high standard of living, strong economy, and stable political climate, Alberta has become a top destination for investors worldwide. In this article, we will explore five key points that explain why investing in Alberta a real estate portfolio is a wise decision.
· Investor friendly province
· Affordability and livability
· New home construction
· Migration & Immigration to Alberta
· Real Estate outlook for 2023
Investor friendly province
Alberta has one of the strongest economies in Canada, driven by the energy and natural resources industries. The province is home to the third-largest oil reserves in the world and is a major exporter of natural gas. This robust economic growth translates into increased demand for real estate, making Alberta a province in western Canada that boasts a thriving economy, a diverse population, and a beautiful landscape. One of the most alluring aspects of Alberta investing is its lucrative real estate market. Alberta investing is an excellent option to consider.
While the recession looms, Alberta has consistently had one of Canada’s highest economic growth rates, driven primarily by its oil and gas industry.
Alberta is expected to lead the country in gross domestic product growth (GDP) at 2.8%. The Alberta budget forecast projects a surplus of $2.4 billion in 2023-24, with projected revenue at $70.0 billion. Nearly 23 billion will be spent through 2025-26 in capital project support in healthcare and infrastructure. The proof?
Alberta Investing Calgary
- Calgary’s new cancer centre, the largest government infrastructure in the province, is a 1.4-billion-dollar project and is expected to be completed this year.
- Calgary’s ring road is slated to be completed by 2024 and is a 1.2 billion project.
Alberta Investing Edmonton
- Edmonton has plans to build a 1.8-billion-dollar South Hospital & Campus with a completion date projected for 2030.
Alberta is considered one of the most investor-friendly provinces in Canada, with policies that make it easier to buy and manage rental properties. Lack of rent control allows Alberta landlords to keep up with the 6% inflation rates. Alberta landlords do not face restrictions in raising the rent. In contrast to Ontario and BC’s rent control increase guideline, which only allows rental rises of 2.5% and 2.0%, respectively.
Adding to the affordability, Alberta real estate has the lowest tax rates in Canada, no provincial sales tax, and no land transfer tax, which makes housing prices more reasonable.
Below are three examples of land transfer tax on a $700,000 home.
The envy of Ontario and BC, landlord-tenant laws in Alberta real estate favour landlords. The time it takes to receive a hearing date for a landlord/tenant dispute with Alberta’s Residential Tenancy Dispute Resolution Service (RTDRS) is approximately two weeks as opposed to BC’s Landlord Tenant Board’s (LTB) wait period of two months and Ontario’s much-publicized LTB hearing delays of up to two years.
Affordability/Livability
Alberta is generally considered a livable and affordable province in Canada. Here are some factors that contribute to its livability and affordability:
- Housing Affordability: Alberta has some of the most affordable housing in Canada. The cost of living in Alberta is also relatively lower than in other provinces, making it easier for people to live comfortably and save to buy a house, making Alberta investing a smart decision.
- Job Opportunities: Alberta has a strong job market, especially in the oil and gas, agriculture, and forestry industries. The unemployment rate in Alberta is typically lower than the national average and pay is higher.
- Quality of Life: Alberta is known for its beautiful natural scenery, including the Canadian Rockies, and its cities are considered clean and safe. The province has a robust healthcare system, and education is generally of a high standard.
- Recreation: Alberta offers many recreational opportunities, such as world-class skiing, hiking, and camping at Banff, Jasper, and Lake Louise – all within driving distance. There are also many cultural attractions, such as museums, galleries, and theaters.
- Climate: Alberta has a varied climate, with long, cold winters and hot summers. While this can be challenging for some, many people enjoy the change of seasons and the recreational opportunities that come with them.
The (EIU) Economist Intelligence Unit ranks Calgary as one of the world’s most livable cities, just behind Vienna, Austria, and Copenhagen, Denmark. Canada’s other top 10 cities are (predictably) Vancouver and Toronto.
But that’s not all! Calgary leads the country in appreciation, as demonstrated in the below chart.
Overall, Alberta is a livable and affordable province, with many opportunities for people to work, play, and enjoy a high quality of life.
The following image is from Zoocasta and shows the average Canadian Real Estate Prices in 2022.
Below is a chart from Statista 2023 showing the income needed to afford a home in Canada.
Here are some quick facts about Alberta investing in the Calgary and Edmonton markets.
- Calgary continues to be a seller’s market, with inventory remaining extremely low in all property types. The current inventory is around 1.5 months The Edmonton market is a buyers’ market, with the inventory at 5.7 months of supply up 50%.
- Edmonton is a buyer’s market since it has the most affordable rental market among big cities. It also features more 3-bedroom rental units, with the average price being $1,500 – half the price of a 3- bedroom in Toronto.
- Edmonton has more purpose-built rentals than Calgary
- The Calgary rental market remains in high demand. Vacancy rates are around 2.5% or less, depending on the product. Two-bedroom rents are up 17% to $2,300 when compared to Toronto at $3,300.
- Lower rental vacancy rates, and higher interest rates = quality tenants
New Home Construction
Alberta is known for its strong economy, growing population, and expanding urban areas. As a result, the demand for new homes in the province has been relatively high in recent years.
In 2020, despite the COVID-19 pandemic, Alberta’s new home construction industry remained relatively stable, with approximately 24,000 new housing units starting. It decreased from the previous year, which saw over 26,000 new housing units started, but still a respectable number given the circumstances.
The types of homes being built in Alberta vary widely, from detached single-family homes to townhouses and condominiums. The province has also seen an increase in demand for energy-efficient and sustainable homes, which has led to more green buildings and eco-friendly communities.
Overall, Alberta’s new home construction industry is an important part of the province’s economy and plays a significant role in meeting the housing needs of its growing population. Here’s a quick snapshot of Calgary and Edmonton’s new home construction highlights.
- Calgary home construction cost up 14% in 2022.
- Calgary was trailed only by Toronto at 21.9% and Edmonton at 16%
- Because of the challenges in acquiring materials and the skilled labour shortages, Calgary is currently estimated at 3,000-4,000 construction workers short.
- Calgary Real Estate Board’s (CREB) estimated timelines for a multi-unit project are currently at 20 months and a detached home at 8 months.
- Alberta housing is up 16.5% in 2023 to a total of 2010 units, up from 1725 units.
- Inventory remains very low at 1.58 months of supply, the lowest since 2006.
- Multiple offers are becoming more common again, even with condos.
Alberta investor trends
High levels of volatility and growth have historically characterized Alberta’s real estate market, which is closely tied to the energy sector. In recent years, the province has seen a slowdown in its real estate market due to the oil and gas industry downturn. However, the market has started to show signs of recovery in some areas, particularly in Calgary and Edmonton.
One of the major trends in the Alberta real estate market is the increasing popularity of multi-family properties particularly rental apartments, and condos. This trend is driven by demographic changes such as an aging population, a rising number of young professionals and immigrants, and a growing preference for urban living.
Another trend is the increasing popularity of sustainable and energy-efficient buildings. Many investors are now looking for environmentally friendly properties with a lower environmental impact. The Calgary City council has committed $100 million to downtown adaptive reuse and up to $10 million per building, thus converting office buildings into residential buildings.
This trend is driven by a growing awareness of climate change and the need for sustainable practices.
Another Alberta real estate investor trend is fueled by The City of Calgary’s amnesty program, which runs until the end of 2023 and was created to take pressure off homeowners who want to legalize existing secondary suites that were built before March 2018.
With the continued reduced supply in Calgary, we will likely see further upward pressure on prices in 2023. Still, overall, real estate investment in Alberta can be a good option for investors looking for long-term capital appreciation and rental income.
Migration to Alberta
Alberta has historically been a popular destination for immigrants and migrants from within Canada due to its strong economy, high quality of life, and abundant job opportunities. Here are some key points regarding migration to Alberta:
- Many immigrants are attracted to Alberta’s energy sector, but the province also offers job opportunities in the healthcare, education, and technology sectors.
- Most immigrants and migrants choose rental properties over home ownership during their first few years living in a new city/province.
- Interprovincial Migration: Alberta also attracts migrants from other provinces in Canada, particularly from neighboring provinces such as British Columbia and Saskatchewan. This is largely due to the province’s strong economy and job opportunities.
- Rural-Urban Migration: Alberta’s cities, particularly Calgary and Edmonton, have experienced significant population growth in recent years due to migration from rural areas of the province. This is due to the greater availability of jobs and services in urban areas.
- Express Entry Program: The federal government’s Express Entry program has also been a popular route for immigrants to gain permanent residency in Alberta. The program allows skilled workers to apply for permanent residency based on factors such as their age, education, language skills, and work experience.
- Alberta expects an increase of 52,582 to their population – up by 207%.
- Alberta’s strong population growth has led to an increased demand for housing and rental properties.
Overall, Alberta’s strong economy and diverse job opportunities continue to attract both domestic and international migrants.
Total Net Migration chart from Stats Canada below.
2023 Outlook
Alberta real estate is poised to outperform Canadian housing market in 2023 as the population grows. Across Canada, monthly average housing prices have tumbled almost 20% from their peak, with interest rate hikes and economy slowing down. However, Alberta housing prices have only dipped 6% on average. High demand and low supply will help keep Alberta’s real estate market insulated from the 2023 recession.
Summary
The strong economy and high immigration and migration levels are expected to minimize the impact of the recession the real estate market.
Additionally, Alberta’s attractive policies and investor-friendly environment make Alberta an attractive place to invest in real estate and rental properties even during a recession.
Much of this content was sourced from a presentation recorded for the Canadian Real Estate Channel from Corey Peckford’s presentation. on Why Invest in Alberta real estate.
Do you invest in Alberta real estate? I’d love to know why or why not, email me [email protected]
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