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Calgary lags Edmonton as place to invest
Nov. 7, 2003
Michael Lau
Calgary Herald
Fourth-Place Finish:
The Real Estate Investment Network issued a report Thursday saying Calgary's hot real estate prices make rental properties a better investment in Edmonton.
Soaring house prices were partly to blame for dropping Calgary to fourth place -- behind Edmonton and the towns of Devon and Sylvan Lake -- in a ranking of top places in Alberta to invest in residential real estate.
Real Estate Investment Network based its report on the return-on-investment potential of 31 Alberta cities and towns.
"Edmonton is No. 1 because for every dollar you put out into an investment, you will get more of a dollar back than in Calgary right now," network president Don Campbell said Thursday.
"It's easier to get positive cash flow properties in Edmonton right now than it is in Calgary because the rent-to-value ratio is closer in Edmonton than it is in Calgary."
Calgary's average price for houses and condominiums was $209,932 in July, more than $24,000 higher than Edmonton's $185,537 average for detached homes.
"You can still make money in expensive markets as long as the revenue will allow that market to continue to go up," Campbell said. "But while revenues are lower in Edmonton than in Calgary, the values are substantially lower."
Real estate officials said Calgary's ranking is probably linked to house prices, which according to the study have jumped 14 per cent since 2001.
"If you're an investor and you're buying an apartment building, the same apartment building here will cost you more," said Joyce Travis, immediate past president of Calgary Real Estate Board.
"I don't really think there would be much difference between Edmonton and Calgary in terms of risk. So, if you're getting more money for the same risk, your capitalization rate is better, which means it's considered a better investment."
However, Travis said Calgary and Edmonton should always receive the top rankings for investment.
"Long term, you would be better off in a bigger city. There are more buyers and more people coming there to buy, so it's more of a stable market," she said.
"Things can happen in small towns that can so severely affect the town that the investment potential is really harmed, and sometimes for a few years."
Edmonton officials said the city is being recognized by the study as an ideal place to invest.
"The report is another credible endorsement of Edmonton's long-term economic climate," said Jim Rudolph, a spokesman for Economic Development Edmonton.
Despite placing fourth in the ranking, Campbell said Calgary is likely on the rise.
"The demand will start to occur again, the in-migration will begin to pick up again, infrastructure dollars will start to be spent again in Calgary," he said.
"It's almost like the market took a big breath for the last eight or nine months. The values did continue to go up but were not driven by an investment opportunity. It was more market exuberance than economic fundamentals driving it at that point."
The report ranked: Edmonton, first; Devon, second; Sylvan Lake, third; Calgary, fourth; Red Deer and Okotoks, tied for fifth; Lacombe and High River, tied for sixth; Cochrane, seventh; Grande Prairie, eighth; St. Albert, ninth; and Fort McMurray, tenth.
Real Estate Investment Network is a Calgary-based education oriented investment group.
The network has more than 760 members who pay a monthly fee for unbiased research to assist in targeting investment opportunities in residential real estate.
Top 10 Places to Invest:
1. Edmonton
2. Devon
3. Sylvan Lake
4. Calgary
5. Red Deer, Okotoks
6. Lacombe, High River
7. Cochrane
8. Grande Prairie
9. St. Albert
10. Fort McMurray Posted November 07, 2003 |
