 All Aboard Alberta's Real Estate Express - Globe & Mail June 27, 2006 All aboard Alberta's real estate express
PATRICK BRETHOUR
June 27, 2006
Globe and Mail Update
ROCKY MOUNTAIN HOUSE, ALTA. — Scott Rosseu has had a first-hand look at the oil-induced real estate mania in Dubai for the past three years, where soaring crude prices have led to massive speculation.
But when the 36-year-old Vancouver expatriate finally decided to jump into the market himself, he didn't land anywhere in the United Arab Emirates.
Instead, he flew halfway around the world to invest in that other oil-induced real estate boom -- the one in Alberta.
Mr. Rosseu, who was part of a group of 330 real estate investors touring central Alberta by bus last week, didn't even wait for the sightseeing expedition before making his purchase of a rental property, a $140,000 three-bedroom townhouse in Edmonton.
Although Edmonton has not quite reached the frenzy of Calgary to the south, the real estate market in the city has grown intensely competitive, with Mr. Rosseu only having a shot at the townhouse because an earlier deal had just fallen through.
Sitting in Rocky Mountain House, about 80 kilometres west of Red Deer, during a break in the tour, he still marvels at how quickly he needed to move to secure a foothold in the formerly moribund Edmonton market. "I was in Edmonton for one day," he said.
Mr. Rosseu is one of scores of investors from outside the province looking for a way to buy into Alberta's oil prosperity. Nearly one-third of the people on the tour -- five times as many as the last tour three years ago -- were from outside of Alberta, although most were from other parts of Canada. They are all looking to find the next market where oil money will draw in workers and set off a price spiral as it has in Fort McMurray, Calgary and, to a lesser extent, Edmonton.
"There's more appreciation here," said Shemin Rajan, who is selling off her real estate holdings in Ontario and snapping up rental properties in Alberta, particularly Edmonton and High River, to the south of Calgary.
The tour didn't even veer into Edmonton, where, as Mr. Rosseu discovered, the spiral has already begun. Red Deer, halfway between Edmonton and Calgary, was the starting point, with Lacombe to the north next, then Rocky Mountain House to the west, and finally the weekend playground of Alberta's oil rich, Sylvan Lake.
A convoy of six buses rolled out early Friday morning to scrutinize Red Deer through the lens of a prospective real estate investor.
"What we're doing is showing them how to look at a town," said Don Campbell, president of the Real Estate Investment Network, organizer of the tour.
The notes for the tour highlight some of that methodology -- including the significance of new churches at the edge of a town. New housing typically follows, along with appreciation of existing housing stock.
Mr. Campbell and his investors are taking aim at the resale market, and in doing so are hoping to avoid one of the main perils of Alberta's sizzling economy: the lack of workers. That shortage will lengthen waiting times for new homes and drive up prices for buyers in Calgary this year by 9.8 per cent, according to Canada Mortgage and Housing Corp. projections. At the same time, land prices are soaring in Calgary, creating a speculative frenzy, said Mark Love, one long-time builder and investor in the city. "Restaurant owners become condo owners overnight," he said.
The heat of the Calgary market generated little warmth among the investors on the tour buses. Dean Pariposh, of Toronto, said he thought about buying rental properties in Calgary, but then calculated that he would be paying out more in mortgage and maintenance expenses than he was taking in from tenants. He went to Edmonton instead, bought several properties and raised the rents by 20 per cent. (There is no rent control in the province, so rents are negotiated much like any other contract.)
Although there have been numerous stories in the local press about tenants suffering from sudden jumps in rent, Mr. Pariposh said none of his tenants gave notice to move out. For him, it is a confirmation of his investment strategy: Incomes are rising, so tenants can afford to pay more, and the flood of workers into the province means there is competition even for more pricey accommodations.
Posted June 27, 2006 by Patrcik Brethour |
