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article imageCalgary developers adapt to changing conditions Special

By Georgia Williams     Jan 27, 2016 in Business
Calgary - Alberta, a province that is arguably Canada’s equivalent to Texas, has faced some very difficult financial pressures over the last 12 months.
The economy, which is heavily reliant on the province’s oil industry, has experienced a two-sided threat: namely, low global oil prices coupled with a rapidly falling Canadian dollar. Both factors have been responsible for driving up production costs in the oil sector, while simultaneously reducing profits.
In a trickle-down effect, pressure in Alberta’s oil and gas sector has negatively impacted other industries in the province. One of those is Alberta’s real estate industry, which just a year ago was a thriving sector, boasting some of the strongest levels of demand in the country.
Alberta’s once booming housing market has cooled significantly over the last six months, despite the Canadian housing sector ending the year on a high. Royal Bank of Canada economist, Robert Hogue, highlighted the increasing disparity in the housing market across the country to the Globe and Mail earlier this month. Hogue commented that 2015, “will go down into the history books as one of the most unusual for Canada’s housing market, it featured record highs, sharp declines, unexpected strength, concerns about overheating, concerns about not enough heat.”
While many worry about the fluctuating housing prices in Canada’s prairie province, Calgary, Alberta’s second largest city, still outsold Ottawa, Montreal and two other major Canadian cities in 2015. The average single family home in Calgary sold for over $400,000 in 2015, which represented the third highest rate in the country.
There is no doubt the Alberta housing market isn’t as prosperous as it was a few years ago and that it has been impacted by oil prices. However, it isn’t all doom and gloom. Edmonton, the capital of Alberta, has experienced growth in its re-sale home inventory, something which is enticing buyers. “With interest rates still at an all-time low, this may be the ideal time to make a new home purchase,” City of Edmonton Chief Economist and Senior Market Analyst of the Canadian Mortgage and Housing Corporation, Christina Butchart, told the Edmonton Sun.
Economists do expect that the Alberta economy will make a slow recovery. Just when that will be remains uncertain. However, the volatility has presented real estate developers with a unique opportunity to think beyond what was successful in the past, and plan for the future.
Some developers are relying on the addition of more state-of-the-art homes to ensure they have the supply they need when real estate demand returns. Edmonton based developer Alldritt Land Corporation just unveiled a new housing development on the city’s west side called Granville. The company remains optimistic that buyers will appreciate the location, convenience and amenities and will come with checkbooks in hand.
On the other hand, Calgary’s Strategic Group, a company well-known for its commercial real estate projects, is focusing on its rental property construction. The rental housing sector happens to be one of the fastest growing real estate related sectors in the province, and Strategic Group’s CEO, Riaz Mamdani, is positioning his company to take advantage of that growth.
“When the commercial real estate sector began to change, we saw an opportunity [in the rental housing market] that would otherwise have been unfeasible,” Mamdani comments.
Riaz Mamdani also points to an increasing demand for rental units in Calgary, which will continue to be fueled by a young and continually growing population and a lack of modern rental buildings. Confidently, Mamdani “expects all the rental property projects we [Strategic Group] have in development to be fully occupied once opened.”
Strategic Group currently has five rental properties in development in southern Alberta and plan to have at least four more by summer of this year.
Mamdani and Strategic Group’s forecast is on par with the province’s economic indicators.
“Multi-family housing starts are on track to hit their highest levels recorded in Edmonton in 2015, while in Calgary they are expected to hit their second-highest levels since 1981,” wrote Globe and Mail reporter Tamsin McMahon. “More than a third of that jump in both cities has come from a surge in rental construction.”
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