Economist predicts steadily rising home prices for Alberta

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By Mario Toneguzzi, Calgary Herald August 13, 2010

CALGARY – Alberta home prices are expected to rise by 2.6 per cent this year and another 0.9 per cent in 2011, according to an analysis of the Canadian housing market by a senior economist.

Robert Hogue, with RBC Economics, said in his report that the province’s average value of a detached bungalow will increase to $338,000 this year and then to $341,800 next year.

“The sharp drop in demand considerably weakened market conditions in recent months,” he wrote in his analysis. “While supply has begun to adjust modestly downward, it remains plentiful, even a little excessive relative to the current pace of home resales.

“Consequently, the provincial market has shifted very close to being a buyers’ market, which will exert some downward pressure on home prices in the near term. As demand picks up later this year and further downward adjustment is made to supply however, we expect that a stronger balance will emerge that will lead to moderate price increases during the course of next year.”

As for sales of existing homes, Hogue predicts they will decline by 9.9 per cent this year in the province to 51,800 units followed by a 9.1 per cent increase in 2011 to 56,500.

He said last year’s rebound in Alberta’s housing market proved to be temporary as monthly home resales “fell precipitously” so far this year, down 34 per cent year-over-year in June.

“Except for the lows reached at the bottom of the 2007-2008 market downturn, the pace of resales in June was the weakest since early 2001 – and fully 40 per cent below that which was maintained during 2006 (i.e., before the downturn,” wrote Hogue.

“Such weakness amid improving conditions in the provincial economy strikes us as being overdone. We expect that the continued strengthening in the economy (and brightening of employment prospects) will lead to a turnaround in housing market activity later this year, with the amelioration likely to be mild at first but then becoming more pronounced during 2011.”

© Copyright (c) The Calgary Herald

Calgary No. 1 for real estate investment

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By Jesse Kinos-Goodin, Financial Post August 11, 2010

When investing in real estate, sometimes it’s necessary to look beyond your own backyard.

The Real Estate Investment Network, a national organization of investors, has compiled what it says are the top 10 Canadian cities in which to invest, with Calgary leading the way. But only a handful are major cities, and some are surprising.

Don Campbell, the group’s president and one of the researchers on the study, says the results are based on factors such as planned transportation improvements, or if the area’s average income, population growth and job growth are increasing faster than the provincial average.

Nothing east of Ontario shows up on the list, and while Campbell says cities like Halifax, Saint John and Moncton “still provide decent returns,” the top cities are ones that will outperform the national average between 2010 and 2015.

Calgary was ranked at the top because it’s “poised to outperform the average by a wide margin,” says Campbell.

After two years of declining average resale housing prices, the Canada Mortgage and Housing Corp. has predicted they will increase year-over-year in 2010.

The report credits the downturn to a much-needed correction, and that it was “economically impossible for the (Calgary) market to continue at the pace at which it was heading.” But now that it is coming out of the recession, along with economies elsewhere, Calgary’s strengths in producing food, fuel and fertilizer will boost its growth.

“Calgary is in a unique economic and geographic position to take advantage of the direct and indirect jobs this increase in demand will create,” says Campbell, who adds that with strong in-migration and renewed affordability, the city provides a good buying window for long-term investors.

The top 10 cities are:

1. Calgary

2. Kitchener-Waterloo-Cambridge, Ont.

3. Edmonton

4. Surrey, B.C.

5. Maple Ridge & Pitt Meadows, B.C.

6. Hamilton, Ont.

7. St. Albert, Alta.

8. Barrie & Orillia, Ont.

9. Red Deer, Alta.

10. Winnipeg

© The Financial Post