Housing Forecast Seminar Live Blog – Edmonton Business and Commercial Climate
First up today we have John Rose, Chief Economist, City of Edmonton who says we have a positive outlook going forward, with caveats. This is a live blog so please forgive any typos/grammar/spelling issues:
- Natural gas prices will remain low (relative to historical highs)
- Oil prices, current run up is getting ahead of itself, but prices should remain in the high 80's-low 90's for the foreseeable future (good for Alberta and Edmonton)
- Alberta GDP growth lagged behind Canada in 2010, but expect final numbers for greater Edmonton to show growth over 3% and ahead of national average, while the city will be slower. This is partly because the city did not dip as much as the broader region
- Canadian dollar is at parity with the US$ and we should continue around $1.05 for the rest of the year due to weakness in the US$ more than strength in our own. US fiscal situation is diplorable and $ could further weaken.
- Interest rates - nowhere to go but up. Had a false start last year with rate increases, slowdown followed immediately the BoC backed off. They just delayed the inevitable. It's not a question of if rates will go up, but when. John expects at least .75% increase by the end of the year, and 2% by the end of 2012. Increases will be rapid when they come, likely starting in the second half of the year.
- Inflation in Edmonton is essentially 0 currently, we are in a low inflation environment compared to the rest of Canada and North America. This is a major change from a few years ago.
- UE is trending down in Edmonton (currently 5.8%). Expect net migration to rise in Edmonton.
- Edmonton housing market is settling into a balanced situation and should "firm up"
- Costs associated with non-residential constructions have begun to move up raising concerns for medium term, but currently very favourable.
- Jobs lost in '08&'09 have largely been recovered. Edmonton is generating jobs at twice the rate of Alberta and has now started to create more jobs than the peak. (US will take 4 more years to re-coup the jobs lost.) "We are out of the hole in Edmonton and moving forward." 6 out of every 10 jobs created in Alberta were created in the Edmonton region. Calgary's labour force is shrinking - people are leaving - we have the opposite situation.
- Last boom was driven by investment. The largest driver of the boom was conventional oil and gas. There is currently no reason to expect a boom in relation to natural gas because prices are low and will remain... this means we shouldn't see another investment lead bubble. Rather we should have more stable and sustainable growth.
Three forecase scenarios:
Baseline - 55% probability - moderate sustainable recovery in energy related investments spread out over the forecast period.3-4% growth for next few years then tapering off.
High - 15% - relatively quick recovery in energy related investments bunching up from 2011-2016. 4-4.5% growth then taper off.
Low - 30% - Slower US recovery, depressed energy prices and very slow recovery in energy related investments.
- Greater Edmonton area will enjoy a quicker recovery as manufacturing picks up. Inward migration will pick up, migrants tend to be young and have families.
- Over the medium term city growth with converge with the rest of the province, city will outperform region in 2016 and after.
Summary:
1. Low interest rates will not last. Will move up a lot in 2012.
2. Relatively low inflation.
3. Modest but solid and sustainable recovery (no boom/bust).
4. Some downside risk due to sluggish US recovery depressing energy prices.