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What economic downturn? Edmonton building permit values soar

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Despite Alberta’s economic doldrums, Edmonton’s construction industry appears to be booming — for now.

The City of Edmonton issued building permits worth almost $2.4 billion in construction value in the first six months of this year. That’s a 14-per-cent increase from the same period last year and a 33-per-cent increase over the five-year average.

The City announced the surge in building permits Wednesday, the same day the Canadian dollar dropped to levels not seen in more than a decade as the price of oil and gold both came under pressure.

The city’s chief economist John Rose said the construction is resulting from rapid employment and population growth between 2012 and 2014. People who moved to the region in that time are still looking to buy houses, and high employment means there’s a need for more office space.

“This is the building and construction industry catching up to a period of very rapid growth as opposed to the response to the immediate conditions,” he said. “On the housing side and commercial space, we have a lot of suppressed demand.”

However, as new construction catches up to the built-up demand, the construction boom will likely slow.

“I would not anticipate that next year we’d have anything near what we have this year,” Rose said.

Brad Ferguson, president and CEO of Edmonton Economic Development Corp., said the figures give an “artificial” sense of security.

Businesses are cutting capital expenditures as oil prices tumble, and cuts are expected to continue.

“We’re dealing with the global market in retraction mode, and that’s affecting us in Alberta and northern Alberta,” he said. “It dries the Edmonton market.”

Edmonton still has a relatively low vacancy rate of 2.4 per cent — an improvement over the one per cent vacancy rates experienced in the city over the past several years. Rose said he is not worried about an “overbuild” situation on either new residential or commercial construction, and does not think developers are putting up new buildings based on speculation.

“You’re talking about pretty astute developers. They don’t put up buildings until they have a lot of that space pre-rented to occupants. I’m not too concerned about an overbuild situation,” he said.

The $2.4-billion worth of building permits includes residential, commercial, industrial and institution building construction.

Some of the biggest building permits to get the green light in the first six months of this year include a permit for part of the 62-storey Stantec office and condominium building near the new downtown arena, worth $91-million in construction value; a permit for part of the Edmonton Civic Tower, worth $23-million in construction value; and a permit for part of the Brewery District development at 121st Street and 104th Avenue, worth $12.7-million in construction value.

The loonie was down Wednesday 0.53 of a cent to 76.70 cents US, the lowest level since Sept. 1, 2004.

Oil prices dropped below the US$50 mark in trading Wednesday, settling at US$49.19, while gold lost US$12 to fall to $1,091.50 an ounce.

With files from The Canadian Press

SOURCE: http://www.edmontonjournal.com/What+economic+downturn+Edmonton+building+permit+values+soar/11234573/story.html

Alberta and the oil crash, 1 year later

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This is an interesting article that we wanted to share:

12 months ago, oil was trading at $106 US a barrel. How has Alberta survived the crash, so far?

It’s not exactly a happy anniversary for Albertans, but it was a year ago this week that the slide in oil prices began.

On June 20, 2014, a barrel of West Texas Intermediate sold for more than $107 US a barrel, a price that seems impossibly high now.

The decline was gradual at first, and it took a month before oil dipped below $100. Then came the OPEC meeting on Nov. 27 that caused the bottom to fall out of the oil market after the cartel said it wouldn’t slash output to try to raise prices.

OPEC’s decision to stand pat sent the oil market, which was already slumping due to oversupply, into freefall, with the price of WTI eventually bottoming out at around $42 a barrel in March.

Since then, Alberta’s economy has been sending mixed messages. Tens of billions of dollars of energy investment has been cancelled. The energy industry collectively lost $600 million in the first three months of 2015. There are 25,000 fewer jobs in the oilpatch.

On the flip side, housing prices are stable, overall employment is up, and, for some reason, people are still moving to the province.

It raises the question — just what is going on in Alberta?

Migration momentum

In the first three months of 2015, right in the depths of the oil crash, 9,000 people moved to Alberta, 8,000 from other parts of Canada.

It may not be the right time to be coming to Alberta, but it is not surprising to Robert Kavcic, a senior economist at BMO Capital Markets.

“It takes a little bit of time for people to respond to the shock,” said Kavcic. “Even if you go back to the recession in 2008-2009, the economy was already starting to pull back pretty sharply in 2008, and you still saw inward migration. It wasn’t until the middle part of 2009 that those flows turned negative.”

The Alberta government points out that this is the slowest pace of in-migration since 2011. But if you reach back to the 2008-2009 recession, Alberta still had an overall influx of 13,000 people in the fiscal year, according to numbers from Statistics Canada. Perhaps old habits die hard.

Job market resilient

But did those migrants find jobs when they got here?

The first four months of the year showed that yes, they did, Alberta added jobs through April, just not in the energy sector.

The numbers seemed to show that as Albertans lost oilpatch jobs they found them in the service sector, or refashioned themselves as consultants and joined the ranks of the self-employed.

However, the situation varies depending on where you are in the province. In northern Alberta, unemployment is trending higher; the unemployment rate in Wood Buffalo, the municipality that includes Fort McMurray, is now 8.3 per cent, up from 4.2 per cent just this year.

Prince Owusu, a senior economist at the Conference Board of Canada, expects the second half of the year to be rougher for Albertans. He suggests that the first half of the year was harder on non-residents who travelled to Alberta to work.

“Our sense is that maybe the initial impact in terms of the job losses is due to the fly-in, fly-out workers. We don’t have the numbers to support it, but that’s where our initial inkling is leading us.”

Housing market

Activity in the housing market has slowed dramatically in Calgary — around 30 per cent so far this year. However, prices remain steady, according to numbers released by the Canadian Real Estate Board.

That might be about to change. Another housing price index, released by Teranet, shows that the average home in Calgary dropped by four per cent so far this year.

In Edmonton, both activity and prices are holding up better than in Calgary, perhaps because its workforce is not as focused on the energy sector as is Calgary’s

Recession or no recession?

Many are asking, is the province in recession? It seems to be trending in that direction, barely.

The Bank of Montreal is forecasting a contraction of 0.2 per cent this year.

The Conference Board of Canada, after calling for a 1.5 per cent contraction, has now revised that to a 0.7 per cent contraction.

The provincial government, before it got booted from office in May, had been calling for growth of 0.4 per cent.

These are all similar in that they are rounding errors off what is essentially a flat economy. Which is still a pretty resilient showing for a province that will lose an expected $40 billion in investment.

So, while it’s not exactly an anniversary worth celebrating, Albertans should take a moment to be grateful that the province has held up so well.

At least, so far.

 

SOURCE: http://www.cbc.ca/news/business/alberta-and-the-oil-crash-1-year-later-1.3126945