Albertan's Just Treading Water

[Jsan]

I just heard a story on CBC radio about how so many people are just struggling to survive in Alberta. They said that even though wages have gone up, people are saving less than they did 5 years ago due to the very high inflation rate in Alberta and due to the off the chart cost of living. They also stated that the food bank has been the busiest in years for the very reason that even some families with 2 jobs just can't keep up after paying rent or their mortgage plus the cost of the bare necessities. I totally understand where they come from. I just got hit with ANOTHER 200 dollar a month rent increase notice to take effect January 1st. My rent has gone from 600 dollars per month to 1300 dollars per month while my wages have barely budged. I am in a high tech, well paid field but still find Alberta very unfordable. The Parkland Institute from the UofA is heading a conference to try to figure out why so many Alberta families are struggling so much in what is supposed to be a prosperous Boom but in reality is a BUST for so many people.


"Treading Water

Alberta is experiencing an unprecedented boom, yet most
Albertan’s are finding their paycheques still don’t go quite
far enough. The combination of heated economic growth and
stagnant wages spells trouble for Alberta working families. The
conference will look at the state of wages in Alberta, explore the
causes of these inequalities in the labour market and discuss
solutions to get workers’ wages moving again."

 

[Ariadne]

Over the last 3-5 years, Calgary has been all about money. Everyone that owns a house, one they purchased several years ago for around $200k, thinks that they are now worth a half million or more. Even though that money is only on paper, and the only way they would see any of it is if they sell and then buy a cheaper place in another province, everyone thinks they're rich. People brag about their property being worth X number of dollars - and that's a normal conversation topic. Something has happened to the Calgary culture, and I think that's part of the problem. Greed has overtaken the city. Everyone from the carpenter that makes $20+ per hour to the landlord want more money. Every criminal in the country wants money too, so they have flocked to Calgary. On Friday there was a car hi-jack with gun - never heard of that before!

With rent at $1300, it's actually cheaper to buy something. Even landlords are a little surprised that people pay such high rents when it's cheaper to buy - all tenants are doing is buying a place for someone else. I would suggest that you look at buying a condo. They are still affordable and an excellent investment.

I realize that some people are having problems making ends meet, but I also know of families that are very frugal and are managing. People that think they are rich want to show it, even though they are really no different than 10 years ago, so I think their spending habits have changed - therefore they are struggling more.

One last thought ... Calgary has attracted a lot of people from all across the country in a very short time. Calgary was not prepared for so many extra people so of course there's a housing shortage. Rather than go where there is a house, people stay in Calgary and expect the city to provide. Homeless people are everywhere now - big change. Crime is huge - big change. If you take unemployed or homeless people from across the country and put them all in one city, you will create a place like Calgary where the number of people that cannot afford to live is now a big problem. It would be very interesting to see some demographics on the people that are struggling ... I suspect that a majority of them are new residents. My next question is why people would stay in a city where they cannot afford to live or cannot find work? We know they stay, but why?

 

[Jsan]

"With rent at $1300, it's actually cheaper to buy something. Even landlords are a little surprised that people pay such high rents when it's cheaper to buy - all tenants are doing is buying a place for someone else. I would suggest that you look at buying a condo. They are still affordable and an excellent investment."



No, I have no desire to buy property in Alberta now. As bad as the housing meltdown is in the states, once the Alberta economy cools and it eventually will, Alberta Real Estate in my opinion will get hammered. Allot of people in Alberta have the "Oh but were different" attitude but the reality is nothing that goes up like a rocket comes down gently. Florida is a good example where housing went to unrealistic levels based on huge migration into their state plus easy credit. The people in Florida for the last few years always said there would never be a Bubble and housing was a safe investment. The argument was that because it is such a desirable place to live and because so many people were moving there and so many foreigners were buying vacation, retirement and investment condos that prices might soften but never drop significantly. Well they are in the middle of crashing. Alberta is as susceptible or more so I have no desire to buy any property in Alberta. Here is an excerpt from the article I read.

"When it was all over, [one bidder] walked away with a two bedroom unit on the 19th floor. To put the price in perspective, a one bedroom priced at $350,000 sold on average at auction for $176,000, almost half."A two bedroom unit that sold for about $600,000 last year, sold on average for $295,000."
Those big housing gains are disappearing. In Miami, prices are being cut in half.
You might be thinking…well…one man's loss is another man's gain. But think again. While the bidders got apartments at half-price, the owners of other apartments saw their assets lose 50% of their value almost overnight. A week ago, they may have had an apartment worth $600,000. Now it is worth only $300,000 - and falling.
What happened to that $300,000? It vanished. "

 

[Ariadne]

It was definitely safer to own a house prior to the beginning of the big boom (1999), but I don't think condos are going down that much. There are new condos being built on Riverfront Avenue (completion date 5 years) and there were lineups from midnight on for people to get one - many were disappointed. They started at $400k and, if you watched the news, it was pretty evident that the majority of investors were of Asian origin.

I know someone that bought a condo 3 years ago and the value has gone up significantly. She manages very well and doesn't even have a generous income. It's always risky, but it's still more comfortable to know that your monthly home payments are going to move with the interest rates rather than someone else's greed.

 

[Ten Packs]

Over the last 3-5 years, Calgary has been all about money. Everyone that owns a house, one they purchased several years ago for around $200k, thinks that they are now worth a half million or more. Even though that money is only on paper, and the only way they would see any of it is if they sell and then buy a cheaper place in another province...

Hmmmm...

 

[darkbeaver]

They need Chinese life preservers.

 

[Ariadne]

Hmmmm...

People that do sell often buy into central BC ... buy something, fix it up a bit and then try to flip it like the did in Calgary. Beware people like that ... seriously, I know people that are trying to do exactly that, hoping to make the market do the same thing.

People in Calgary started putting ridiculous prices on their property, never expecting to sell, but along came someone that was willing to pay the price. The next person on the block did the same thing, only adding another $20k to the price ... sure enough ... it sold. Before we knew it, people put and extra $300k on the price and guess what, someone was willing to pay it.

 

[TenPenny]

Let's see. Encana has announced that they'll trim their investment by a billion or so if Alberta raises oil royalties as they plan to.

Multiply this by 10, and what will happen to the housing market?

If I owned a house in Calgary, I'd be tempted to sell and move out east somewhere.

 

[Tonington]

If I owned a house in Calgary, I'd be tempted to sell and move out east somewhere.

I met a lot of home owners this summer in Calgary considering just that.

 

[Ariadne]

That sounds like a great idea for all the people that came to Calgary to flip a buck or two. Those of us that were here before the boom are perfectly happy staying right where we are.

As for Encana and all the other American companies making threats if Alberta addresses the royalties issues, I hope they follow through and get outta town. It would be great to see all the pick pockets and crime disappear to the next Canadian boom town. Alberta needs time to catch up.

 

[Toro]

It was definitely safer to own a house prior to the beginning of the big boom (1999), but I don't think condos are going down that much. There are new condos being built on Riverfront Avenue (completion date 5 years) and there were lineups from midnight on for people to get one - many were disappointed. They started at $400k and, if you watched the news, it was pretty evident that the majority of investors were of Asian origin.

I know someone that bought a condo 3 years ago and the value has gone up significantly. She manages very well and doesn't even have a generous income. It's always risky, but it's still more comfortable to know that your monthly home payments are going to move with the interest rates rather than someone else's greed.

This is exactly why condos are going to crash. This is exactly the playbook why they always crash. Condos are the most speculative properties in any market.

They once thought about that in Miami. See what's happened there.

http://runningofthebulls.typepad.com/toros_running_of_the_bull/2007/08/condo-collapse-.html

That will happen to Calgary one day, too.

It always does.

 

[Kreskin]

Condos starting at 400k? Run as fast as you can in the opposite direction.

 

[Ariadne]

I don't know about that ... luxury condos along the river in downtown Calgary - not a bad price actually.