Edmonton ranked second in CIBC's measure or economic momentum, up from 11th in the 2011 Q1 report. The ranking reflects the city's strong labour market with overall employment rising by almost eight per cent year-over-year in the third quarter—the fastest pace among all of Canada's top cities. "The city also enjoyed one of the lowest unemployment rates in the nation (5.7 per cent as of the third quarter of 2011) while the quality of employment is relatively elevated (ranked 4th among all cities)," notes Deputy Chief Economist Benjamin Tal.

"As well, Edmonton's population is now rising by a year-over-year rate of 1.7 per cent—well above the national average, while the numbers of consumer and business bankruptcies are among the lowest in the nation."

CIBC Metropolitan Economic Activity Index (2011 Q3)

Rank CMA 3Q Moving Average
1. Toronto 23.0
2. Edmonton 20.0
3. Kitchener 18.0
4. Halifax 16.8
5. Vancouver 15.5
6. Ottawa 15.2
7. Montréal 14.9
8. Regina 13.8
9. Calgary 13.1
10. Trois-Rivières 11.7
11. Québec City 11.5
12. Winnipeg 11.1
13. St. John's 11.0
14. Hamilton 10.7
15. Sherbrooke 9.5
16. Kingston 7.5
17. Saint John 7.1
18. Sudbury 6.7
19. Saskatoon 6.4
20. Victoria 5.9
21. St. Catharines-Niagara 5.6
22. London 5.2
23. Windsor 0.4
24. Saguenay -1.8
25. Thunder Bay -3.4

Average of 25 CMAs 10.2

About the CIBC Metropolitan Economic Activity Index
Using 9 key macroeconomic variables, CIBC's metropolitan index of economic activity is structured in a way that approximates the change in each city's level of economic activity. With data going back in history, the index monitors not only the current performance of a given city but also tracks its cyclical behaviour against the national economy and other census metropolitan areas (CMAs). The focus is on the 25 largest CMAs in Canada.

The macro variables used to develop the index are:

Population growth; Employment growth; Unemployment rate; Full-time share in total employment; Personal bankruptcy rate; Business bankruptcy rate; Housing starts; MLS Housing resales; and Non-Residential building permits. The complete CIBC World Markets report is available at: http://research.cibcwm.com/economic_public/download/metro_monitor.pdf

• The Royal Bank predicts Alberta's rate of growth will outpace all provinces except Saskatchewan this year and next.
• The private sector was the source of 116,000 new jobs this year
• The oilpatch and natural resources sector is set to lead the nation with the highest project salary increases next year
• Labour shortages are expected 
• Retail sales rose more in Alberta than any other province last month

Labour shortages and inflation could be a major problem in the province. It's certainly tough to look at all this information and not think of other factors that will certainly affect our economy, like the global financial situation and rising interest rates. On the other hand, when I hear from the Edmonton Economic Development Corporation that there are $17billion worth of new projects set to start between here and Red Deer it's tough not to consider it. At the end of the article the author suggests perhaps a "mini-boom" is more likely and that seems much more feasible to me. 

Edmonton Vacancy Rates, Source: CMHC

The average monthly rent for a 2-bedroom apartment increased to $1,034 from $1,015 in October 2010. Edmonton rental rates were amongst the highest in Canada behind Vancouver, Toronto, Ottawa, Calgary ($1,084) and Victoria.

Edmonton rental rates, Source: CMHC

Bachelor suites reported the lowest vacancy rate at 2.7%. The area with the lowest vacancy rate this fall was St. Albert, at 0.5%, other relatively tight markets included the South West and Leduc, both at 1.2%. The University and Millwoods zones were also showing a low vacancy rate of 1.3%. 

Edmonton rental market by area, Source: CM
 

With vacancy rates moving lower across the Edmonton region, fewer
landlords are offering incentives to lure new tenants and reduce turnovers - 25% of landlords offered incentives last October compared to 10% this year. This represents the lowest level since October 2008. Even though rents increased in the past year, affordability increased as well, since renter income grew at a faster rate than rents.

Apartment vacancy rates across Greater Edmonton decreased in 2011 thanks to improved demand associated with the growing economy and further reductions are expected in the coming year as the economy continues to expand. Supply of new rental units will not keep pace with the expected rise in demand in 2012. Improving employment, particularly among the younger age groups, will encourage more newcomers to the region. Rental rates will continue to rise in the months ahead. A typical two-bedroom unit will rent for close to $1,060 by the fall of 2012.

Today Sara and I attended a seminar hosted by Alberta Real Estate Foundation in their “thought leaders series," titled: "What are the characteristics of a livable, vibrant, sustainable neighbourhood?."  Basically it was a presentation on why sustainability is important. For example did you know that an average home produces almost 8000lbs of waste per year, and that only 3% of the treated water in Canada is used for drinking?

What was really interesting about today’s presentation was the discussion of ideas amongst the attendees. Lets face it, if the city of Edmonton embarks on a sustainability plan without us the citizens buying into it, it will fail. That top down approach just won't work. Granted not all ideas are good and there will be some very different perspectives on each idea. The following suggestions were made from participants at the presentation:

• The city of Edmonton creates a hard line around the city that says no development beyond this point.
• More flexibility is needed in zoning regulations for multi generational families and multi-family units in existing neighborhoods (other than just basement suites).
• More community based natural spaces and public meeting spaces are needed
• There should be more emphasis on community gardens
• Care should be utilized to understand the impact of sustainable initiatives on affordability
• More information is needed on how sustainable improvements affect the market value of properties
• Encourage community engagement to take on some of their own initiatives
• Make communities more walkable
• Time initiatives so as not to create artificial pressures on the market.

These are just a small sample of the ideas that were shared and discussed. So how does this all affect the average Edmontonian? There has been significant documentation that supports that our environment directly affects our quality of life and health. Areas with less public space or less walking areas tend to have higher incidences of diabetes and other related issues. Improper conservation of water might lead to lower quality and quantity of drinking water.

It is Vision that builds great communities, and Edmonton has a huge opportunity that many other cities wish they had. Edmonton has good transportation infrastructure, great health care and health care facilities, word class education and a fairly robust economy. Edmonton is still a hub to Northern Canada’s resources and related activities and unlike a lot of major cities where the downtown is the financial and social hub, Edmonton has the diversity of our employment which is not centred on the downtown. This can lead to a more robust city as a whole and is definitely worth talking about.

It's time to embrace our greatness as a northern city, it's time to think ahead, and it's definitely time to share your ideas about how this should happen. I don’t intend to be the spearhead of sustainable discussion in Edmonton so if someone would like to take it on please do, but I'm happy to help get it started.

• Jobs: In September 2011, Alberta’s unemployment rate was 5.4%, down from the 5.6% recorded in August (the national rate is 7,1%). The number of people employed rose by 8,600  in Alberta in September. Over the last 12 months, the number of employed people in Alberta has risen by 97,700 or 4.8%. The largest
  employment gains were noted for manufacturing, professional, scientific and technical services and wholesale trade, while declines were noted for retail trade
  and educational services.
• Consumer spending: Alberta retail sales rose by 5.5% in July 2011 compared to July 2010. Residential home sales on the MLS rose by 9.7% in September compared to 2010. In August 2011, the number of new motor vehicle sales in Alberta increased by 4.3% from a year ago. Year-to-date automobile sales rose 7.7% from 2010. The Consumer Price Index was up 2.9% in August compared to last year.
• Construction: Housing starts fell 9% in September compared to last year, mostly due to lower multiple starts. Housing starts in Calgary rose by 1.8% while
  Edmonton housing starts fell by 6.1%. In August, the value of Alberta building permits rose by 37.4% from last August. 
• Manufacturing: Shipments in Alberta rose by 15.6% in August compared to last year (nationally this increased by 6.8%).  All sectors except computers and electronics registered significant increases in shipment values. Year-to-date, manufacturing shipments rose 16.2% from 2010. The largest increases were in shipments of petroleum and coal products (up 29.3%), machinery (up 24.5%), and chemical and chemical products (up 19.1%).
• Energy: In September 2011, there were 346 active drilling rigs in Alberta, up 96% from a year ago. For the first nine months of 2010, the
  average number of active drilling rigs rose by 44.3% from a year ago to 269. In September 2011, crude oil prices rose 13.3%, from 12 months earlier while natural gas prices rose by 2.2% in August compared to August 2010.
• Exports: Between August 2010 and August 2011, Alberta merchandise exports increased sharply by 30.6% as a result of strong increases in mining and energy (up 36.6%), manufacturing (up 19.1%) and primary agriculture (up 7.8%). Year-to-date exports rose by 15.8% from the same period last year to $60.6 billion. 
• Bankruptcies and Incorporations: In July 2011, the number of consumer bankruptcies decreased by 14.7%, while a record low 15 business
  bankruptcies were recorded. Year-to-date, consumer bankruptcies fell 11.9% to 4,334 and business bankruptcies fell 34.8% to 148. From January to September of 2011, the number of business incorporations rose 7.1% to 31,297 as compared to the same period in 2010.
• Population: On July 1, 2011, Alberta’s population reached 3,779,353, up 1.6% from July 1, 2010. This was the second highest provincial population growth. The national growth rate was 1.0% over the same period. In the second quarter
  of 2011, net interprovincial migration into Alberta was 4,720. Net international migration was 8,313 over the same period.

I think those numbers speak for themselves. 

This isn’t a post about what I believe, this is about a presentation we attended yesterday on Alberta's demographics, presented by David Baxter of "Urban Futures." The first thing he stated was that if someone says that “the market will fall because of baby boomers, then they just haven’t done their research and you should pretty much disregard the rest of what they say."  Pretty terse words indeed but he had plenty of data to back up his claim. I believe him when he says you can't make a generalization about a third of the population based on their birthdays - Bryan Adams and Stephen Harper were both born in the same year, and K. D. Lang shortly after - could they be more different?

The fact of the matter is, people are behaving differently than they have in the past. Here are some demographic changes he highlighted:

• Before the baby boom women had 3-5 kids and today they have on average 1.7 (1 out of 4 women never have kids today).
• We have extended generations by ten years - women are having kids in their 30s instead of their 20s.
• Homes are becoming "more adult" as adult children stay at home longer while they get their post-secondary educations. This leads to more income per household, and more cars per household - our neighbourhoods are not set up for 5 cars per home.
• Since adult children are staying home longer, they often skip the rental phase and go directly to owning their first home outside the family home. This also means they have better education and earn more when they buy their first home, and often have help from their parents (many parents are taking equity out of their home to help their kids buy - you have to get them out of the house somehow right?)
• Seniors are living longer, and also are living longer in their own homes. 75% of seniors live in their home instead of assisted care of some kind. In the future more seniors will grow old as couples, since you don't have a huge chunk of the male population gone in the war. This could postpone selling the "family home."
• Grandparents are moving to be closer to their grandkids, not necessarily to be closer to medical care or other amenities.
• Alberta is younger than the rest of Canada - our largest age group by population is the group after the baby boomers and this is distinct in Canada because we are taking young people from the rest of Canada. Edmonton's population is even younger than Alberta's.
• About 1/3 of the current population of Alberta was born elsewhere in Canada.
• Edmonton is going to grow twice as fast as Alberta.

So, after educating us on these demographic issues, he stated that: “Edmonton house prices are definitely affordable and sustainable.” He really began by saying the idea that Canada’s housing is over priced is fiction.  He did suggest that Vancouver is in a whole other kettle of fish though. He also suggested that Edmonton’s population growth is going to be among the leaders, if not the leader in the country. He also believes that Edmonton's high percentage of young workers bodes well for Edmonton in comparison to many areas.

He did not state that prices were on their way up, but it was beyond comprehension that they are as low as they are.  Historically speaking homes are just as affordable now as they have ever been in Alberta. A larger percentage of the population in Alberta today owns their home than did in 1975. 

When speaking of affordability, he discussed the studies that financial institutions put together don't actually reflect reality. The average income earner does not buy the average home with 5% down... The average person starts with an entry level home, builds up some equity and uses it to by a larger home with more money down, making the larger home more affordable. As you get older your income tends to grow as does your equity.

He argued that there is substantial equity in Canadian real estate - enough to absorb market shocks and assist younger generations in buying their first homes. This is a sentiment with which I definitely agree and have witnessed regularly.

He made the same presentation today in Calgary, and it is going to be posted on YouTube - when it is we will post it here and provide more detailed analysis on his comments.

His was by far the most bullish presentation on Edmonton Real Estate that I have sat through since 2006. For sometime my bullish sentiment has been growing about Edmonton in relation to its value and affordability. We have decided to remain as objective as possible, but I certainly agree a lot more with Mr. Baxter than I disagree.

RBC's housing affordability measure in Canada's largest cities is as follows: Vancouver 72.1%, Toronto 47.5%, Montreal 43.1%, Ottawa 39.0%, Calgary 35.9% and Edmonton 31.5%. That means it taks 31.5% of monthly income in Edmonton to own an average detached bungalow, including taxes, utilities and mortgage payments. Meanwhile in Vancouver it would eat up 72.1% of your monthly income. 

"The Alberta market continued to be stuck in low gear in the first quarter of 2011. Sales of existing homes and construction of new housing units showed very modest increases," said Robert Hogue, senior economist, RBC. "While market conditions have become more balanced in recent months, owning a home doesn't seem to be getting more expensive in the provincial market at this stage. Affordability levels are still looking quite attractive."

RBC's housing affordability measures remained relatively unchanged, and below their long-term averages in the first quarter of 2011 in Alberta. The measure for the benchmark detached bungalow in the province moved up to 31.3% (an increase of 0.4% from the previous quarter), the standard condominium stayed flat at 20.2% and the standard two-storey home fell to 34.2% (down by 0.2 of a percentage point).

RBC's report notes that there are signs that the Calgary housing market is finally overcoming its protracted slump. "Calgary home prices have yet to break out of their listless trends, but they rose at their fastest rate in more than a year in the first quarter, with detached bungalows leading the way," said Hogue. "Firmer market conditions and higher prices had only limited impact on Calgary's affordability, which remains among the most attractive of Canada's major cities." (This was interpreted by a Calgary reporter to mean that Calgary is THE most attractive of Canada's major cities). 

They did not make any comments (that I could find) on the Edmonton market, even though it was the most affordable in their study. I assume that is because Edmonton is not yet showing signs of coming out of its "slump." I would suspect that will make us even more affordable next quarter (relative to other major cities). 

The majority of Canadian markets experienced weakened affordability in the first quarter of 2011. "Despite the latest erosion in affordability, provincial levels generally continue to stand near their long-term averages, suggesting that owning a home remains affordable or, at worst, slightly unaffordable across Canada - with Vancouver being a notable exception," said Hogue.

New Home Construction in Edmonton

Highlights from the report:

• Construction started on 489 homes in February, down from 642 last year
• 360 single family homes were started in February, down 26% from last year
• Builders have more inventory this year than they did last year (587 units)
• Completions increased on a year over year basis for the 14 consecutive month, builders completed 560 units up 64% from last February
• Absorption was up 49% from last February but fell short of completions by 31 units
• Unabsorbed inventory is at its highest level since July 2009
• Average price of new homes in February was $494,014 - up 6.8% from last February (while resale prices were down about $5k from last Feb
• Multi-family starts decreased 18% to 129 in February (year over year) with stronger activity in the suburban areas being countered by a 39% decrease within the city of Edmonton.
• Inventory of new multi-family homes was up 107 units to 1040 compared to January - this is not much different than last year but still the highest its been in 13 months

The gap in pricing between new and resale continues to climb. Builders are facing a tight labour market and having to compete for supplies with large infrastructure and refinery projects around the province causing their costs to increase. 

I've posted on the topic of buying real estate in the states before, however Alberta Venture magazine recently ran a pretty comprehensive article on the subject; they looked at some of the things that Canadians should take into consideration when buying stateside. I am quoted in the article as an antagonist to purchasing real estate in the US but I just want to be clear that I'm not against 100% against buying down south.  If someone takes the time to do their due diligence there are some excellent opportunities. 

One thing I hear a lot of people discussing is the peak price VS the deal they got/can get on a US property: "I bought this foreclosure in Phoenix for $200,000 and at the peak it was worth $600,000." This bothers me for a number of reasons. The skeptic in me asks: "was it ever really worth $600,000?" It's irrelevant what someone paid for it under the euphoria of their housing and lending boom cycle, since its clearly not worth that much today.  Perhaps they want you to believe it will be worth that much again.

In any case its a great article and is worth picking up the magazine for if you are going to be investing in real estate in the U.S.

• 5.1 and over - severely unaffordable
• 4.1-5.0 - seriously unaffordable
• 3.1-4.0 - moderately unaffordable
• 3.0 or less - affordable

According to the report, the median multiple has historically been affordable and very similar in Australie, Canada, Ireland, New Zealand and the US. The US and Canada are still considered affordable in most markets, but it has escalated sharply in other countries and a few markets in North America.

There were 82 "major markets" considered in the study - those with a population of 1 million or more - 20 were affordable, 25 moderately unaffordable, 13 seriously unaffordable, and 24 severely unaffordable 3 of which were in Canada.   

The most affordable market was Atlanta at 2.3 (median house price $129k). Hong Kong was the least affordable at 11.4 followed by Sydney, and Vancouver (last year's most unaffordable market). Wow.

Edmonton was the most affordable major market in Canada, at 3.5 and was #30 overall. Ottawa came in next, #33 overall at 3.6, followed by Calgary in 43 spot at 4.0. Toronto (5.1), Montreal (5.2), and Vancouver (9.6) were all considered severely unaffordable.

Canada's most affordable markets were Windsor at 2.1, Thunder Bay at 2.3, Fredericton at 2.4, Yellowknife at 2.4, and Charlottetown. 

So, according to this report we are moderately unaffordable, while being the most affordable major market in Canada.