There is no doubt that Edmonton, Canada has seen some spectacular increases in property value over the last ten years. 200%+ in fact. But will this continue and what is Edmonton’s future prospect as a property investment? As usual, the analysts and estate agents disagree.

What caused the real estate boom?

Oil. Oil was discovered in Alberta in 1947, much of it concentrated in central and northern Alberta, making Edmonton the base for much of the oil industry. Edmonton did see a drop in values during the 80’s, but made a full recovery very quickly thereafter. Nevertheless, Edmonton’s continuing growth is based heavily on oil extraction and processing. the Conference Board of Canada’s “Autumn 2007 Metropolitan Outlook,” forecast that Edmonton’s GDP for 2007 will be $44.1 billion (2007 dollars), a 3.6% increase over 2006. The Edmonton Economic Development Corporation estimated that as of January 2005 the total value of major projects under construction in northern Alberta was $81.5 billion, with $18.2 billion occurring within Greater Edmonton.

Edmonton’s nickname is “The Oil Capital of Canada” and Alberta’s massive oil, gas and oil sands reserves are reported to be the second largest in the world after Saudi Arabia. Edmonton continues to attract an influx of oil industry worker, many of them young men and it is forecast that 83,000 new residents will move to Edmonton between 2006 and 2010.

Future prospects

This is where the estate agents and analysts disagree. According to The Edmonton Real Estate Investor Blog, – “I can’t think of a better place to buy investment property in Canada and possibly the world.”

Yet Amberlamb say “leave it much longer and it’ll be an all too expensive commodity to attract much interest and over the much longer term the general appeal of Alberta could waver which could cause declining property prices and rescinding interest in real estate for sale or rent.”

Some things to bear in mind when considering Edmonton as an investment prospect

Edmonton has already been through a major upswing in property values and it is unlikely that will continue at the same pace, and even Edmonton saw a drop in values throughout the last half of 2007 – a drop of almost 12%

Edmonton may be providing a lot of fuel for Canada’s economy, but it’s also providing much of it’s carbon footprint. Unlike the US and UK governments, it seems as though the Canadian government is actually planning to do something about this. Any dramatic efforts to limit Edmonton’s carbon footprint may well affect profits from the oil fields and drive property values down. The only thing keeping them high at the moment is well-paid oil workers and a shortage of supply.

Much of the property built in the last ten years was built hurriedly to catch up with massive shortfalls in supply as thousands of oil workers were drafted in. Don R. Campbell, REIN president suggests, “Right now I am telling everybody to buy resale, to buy something built in 1997 or 1998, when there wasn’t a frenzy and people had the time to finish the properties.

Of course, this is an overall look at the entire area, and there are some parts around Edmonton that have yet to reach maximum growth. Fort McMurray, for instance, was recently mentioned by The Financial Times:

Judi Williams, marketing manager at Property Frontiers, says the demand for rental accommodation in Mongolia and the oil producing regions of Canada is “colossal”.

Property demand in Mongolia is being driven by its large coal industry and rapidly explored gold and oil sources. Major oil and mining companies such as BHP, Ivanhoe and Rio Tinto are opening up operations in Mongolia and sending in hundreds of executives who demand high-quality accommodation. Williams says rental yields are around 13 per cent.Highly-paid oil executives are also flooding into western Canada. Williams says Fort McMurray in Alberta has experienced a 6.8 per cent population increase each year between 2001 and 2005 and a further 30,000 people are expected to relocate there over the next five years. She says 14,000 new homes are required.

“Rental occupancy is currently 99.7 per cent and some workers are being housed in “camps” or flown in every day,” she says.

Yields for a one-bedroom apartment in Alberta are around 11 per cent and capital appreciation is around 20 per cent per year

The full Financial Times article is here

Property Frontiers

Edmonton’s wikipedia page

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