Presentation to Municipal Government Board and Assessment Review Boards Bob Ascah Ph.D. Fellow, Institute for Public Economics Edmonton 14 September 2016
AGENDA • ALBERTA’S BOOM AND BUST ECONOMY • KEY DRIVERS OF COMMERCIAL AND RESIDENTIAL REAL ESTATE VALUES • ECONOMIC DATA • AREAS TO MONITOR • ALBERTA’S FUTURE ECONOMIC PROSPECTS Albertarecessionwatch.com
ALBERTA’S BOOM AND BUST ECONOMY • “Ancient history” - furs, buffalo, grain, oil & gas • Boom #1- Grain trade booms 1890-1930 • Great Depression- Bust #1- 1930-1940 Albertarecessionwatch.com
Bust #1 Albertarecessionwatch.com
ALBERTA’S BOOM AND BUST ECONOMY • Boom #2- 1947-1981 • Leduc, Road building, and Pipelines • Lord Keynes comes to Alberta-public investment- universities, schools, and hospitals • Bust #2- 1981-1995 the consequences of Keynesian, OPEC, and overbuilding Albertarecessionwatch.com
ALBERTA’S BOOM AND BUST ECONOMY • Boom #3- 1995-2014- Klein, McLellan and Newell- oilsands, markets, and over- investment • Bust #3- 2014- the consequences of neo- liberalism, over-investment, and Lord Keynes (again) Albertarecessionwatch.com
ECONOMIC DATA Oil Prices- Real 1946-2016 Source: Macrotrends , http://www.macrotrends.net/136 9/crude-oil-price-history-chart Albertarecessionwatch.com
ECONOMIC DATA- GDP Major Sector Breakdown 35 Shares of GDP by Sector 30 25 Energy sector 20 Agriculture, forestry. Hunting and fishing Construction Retail Trade 15 Real Estate, Rental and Leasing Public administration 10 Source: Statistics Canada, Table 379-0028, GDP at 5 basic prices, NAICS classification 0 2011 2012 2013 2014 2015 Albertarecessionwatch.com
ECONOMIC DATA Gross Fixed Capital Formation 70000 Fixed Capital Formation: Corporations and Governments, NGOs 60000 Alberta- 1981-2014 50000 Consumption of fixed capital: corporations 40000 Consumption of fixed capital: general 30000 governments and non-profit institutions serving households 20000 Source: Statistics Canada, CANSIM Table 384-0037- Gross Domestic Product, 10000 income based, provincial and territorial 0 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Albertarecessionwatch.com
KEY DRIVERS OF COMMERCIAL AND RESIDENTIAL REAL ESTATE VALUES • Commercial- value determination • Interest rates/cap rate • Provincial GDP • Interprovincial and international migration • Disposable income • Construction price inflation • Leasing and vacancy rates • Employment and Unemployment rates Albertarecessionwatch.com
KEY DRIVERS OF COMMERCIAL AND RESIDENTIAL REAL ESTATE VALUES • Residential- value determination • Interest rates/cap rate • Provincial GDP • Interprovincial and international migration • Disposable income • Construction price inflation • Employment and Unemployment rates Albertarecessionwatch.com
10 15 20 25 0 5 Jan-34 May-36 Sep-38 Jan-41 May-43 Sep-45 Jan-48 May-50 Sep-52 Jan-55 May-57 ECONOMIC DATA- Sep-59 Jan-62 Canadian Bank Rate 1935-2016 Interest Rates May-64 Sep-66 Jan-69 Albertarecessionwatch.com May-71 Sep-73 Monthly Jan-76 May-78 Sep-80 Jan-83 May-85 Sep-87 Jan-90 May-92 Sep-94 Jan-97 May-99 Sep-01 Jan-04 May-06 Sep-08 Jan-11 176-0043 Financial Source: CANSIM Table May-13 Sep-15 Bank rate
ECONOMIC DATA- Interest Rates 10 year Government of Canada bond yield 18 1982-2016 16 14 12 10 8 10 year Government of Canada bond yield Source: Table 176-0043 6 4 2 0 Jun-82 Oct-83 Feb-85 Jun-86 Oct-87 Jun-90 Oct-91 Jun-94 Oct-95 Jun-98 Oct-99 Jun-02 Oct-03 Jun-06 Oct-07 Jun-10 Oct-11 Jun-14 Oct-15 Feb-89 Feb-93 Feb-97 Feb-01 Feb-05 Feb-09 Feb-13 Albertarecessionwatch.com
ECONOMIC DATA Capital Investment Albertarecessionwatch.com
ECONOMIC DATA Personal Disposable Income Real household disposable income per capita (dollars (2002)) Alberta: 1926-2013- Annual 35000 30000 25000 20000 Real household disposable income per capita (dollars (2002)) (5) 15000 10000 Source: CANSIM Table 384-5000- Data on long-run provincial and territorial economic performance 5000 0 1926 1929 1932 1935 1938 1941 1944 1947 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 Albertarecessionwatch.com
ECONOMIC DATA Average Weekly Earnings Average weekly earnings including overtime for all employees (dollars) Alberta 2001-2016 (Monthly) 1400 1200 1000 800 Average weekly earnings including overtime 600 for all employees (dollars) 400 200 0 Jan-01 Sep-01 May-02 Jan-03 Sep-03 May-04 Jan-05 Sep-05 May-06 Jan-07 Sep-07 May-08 Jan-09 Sep-09 May-10 Jan-11 Sep-11 May-12 Jan-13 Sep-13 May-14 Jan-15 Sep-15 May-16 Albertarecessionwatch.com
ECONOMIC DATA Population Alberta Population Estimates 1951-2016- Quarterly 4500000 4000000 3500000 3000000 2500000 Alberta population estimates 2000000 Linear (Alberta population estimates) 1500000 1000000 Source: Statistics Canada CANSIM Table 051-0005, Estimates of Population 500000 0 Q3 1951 Q4 1953 Q1 1956 Q2 1958 Q3 1960 Q4 1962 Q1 1965 Q2 1967 Q3 1969 Q4 1971 Q1 1974 Q2 1976 Q3 1978 Q4 1980 Q1 1983 Q2 1985 Q3 1987 Q4 1989 Q1 1992 Q2 1994 Q3 1996 Q4 1998 Q1 2001 Q2 2003 Q3 2005 Q4 2007 Q1 2010 Q2 2012 Q3 2014 Albertarecessionwatch.com
ECONOMIC DATA Interprovincial Migration Net interprovincial migration- Alberta 1970-2016- Quarterly 25000 20000 15000 10000 5000 Net interprovincial migration 0 Q1 1970 Q3 1971 Q1 1973 Q3 1974 Q1 1976 Q3 1977 Q1 1979 Q3 1980 Q1 1982 Q3 1983 Q1 1985 Q3 1986 Q1 1988 Q3 1989 Q1 1991 Q3 1992 Q1 1994 Q3 1995 Q1 1997 Q3 1998 Q1 2000 Q3 2001 Q1 2003 Q3 2004 Q1 2006 Q3 2007 Q1 2009 Q3 2010 Q1 2012 Q3 2013 Q1 2015 -5000 Source: Statistics Canada, -10000 CANSIM Table 051-0017, Interprovincial migrants - -15000 Canada, provinces and territories -20000 Albertarecessionwatch.com
ECONOMIC DATA Employment Employment for all employees (persons) Alberta 2001- 2016 Monthly 2500000 2000000 1500000 Employment for all employees (persons) (13) 1000000 Source: Statistics Canada, CANSIM Table 281-0049- Survey of Employment, Payrolls and Hours 500000 0 Jan-01 Sep-01 May-02 Jan-03 Sep-03 May-04 Jan-05 Sep-05 May-06 Jan-07 Sep-07 May-08 Jan-09 Sep-09 May-10 Jan-11 Sep-11 May-12 Jan-13 Sep-13 May-14 Jan-15 Sep-15 May-16 Albertarecessionwatch.com
ECONOMIC DATA Vacancy Rates 12.0 Vacancy Rates for Rental Accommodation Alberta, Calgary and Edmonton 1992-2015- Annual 10.0 8.0 Alberta 6.0 Calgary Edmonton 4.0 2.0 Source: CMHC , Canadian Housing Observer, https://www.cmhc- 0.0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Albertarecessionwatch.com
100 120 140 160 180 200 20 40 60 80 0 Mar-1999 Sep-1999 Teranet and National Bank Calgary and Edmonton - Mar-2000 March 1999-July 2016 Sep-2000 Housing Indices Mar-2001 Sep-2001 Mar-2002 Sep-2002 Mar-2003 Sep-2003 Mar-2004 Sep-2004 Mar-2005 ECONOMIC DATA Sep-2005 Housing Indices Mar-2006 Sep-2006 Mar-2007 Sep-2007 Albertarecessionwatch.com Mar-2008 Sep-2008 Mar-2009 Sep-2009 Mar-2010 Sep-2010 Mar-2011 Sep-2011 Mar-2012 Sep-2012 Mar-2013 Sep-2013 Mar-2014 Sep-2014 Mar-2015 Sep-2015 Mar-2016 National Bank of Canada, Source: Teranet and Edmonton Housing Price Index Calgary Housing Price Index
AREAS TO MONITOR • Bankruptcy statistics- personal and corporate • Major receiverships- particularly home builders- developers, REITS • Rising property tax arrears • Inter-provincial migration • Fiscal stress at provincial and municipal level • New motor vehicle sales- vehicle registrations • Rising stock of unsold homes and condos Albertarecessionwatch.com
AREAS TO MONITOR • Falling real estate values • Rise in judicial foreclosures • Vacancy rates- office, retail, residential • Delinquencies, provision for credit losses, loan write-offs at SERVUS, CWB, ATB and Canadian banks re. Alberta and oil and gas • Rising interest rates? Albertarecessionwatch.com
AREAS TO MONITOR Employment Insurance Claims -Alberta 1970-2016 45000 40000 35000 30000 25000 20000 E.I. Claims -Alberta 15000 Source; CANSIM 10000 Table 276-0004 Initial and Renewal 5000 0 Jan-70 Jul-71 Jan-73 Jul-74 Jan-76 Jul-77 Jan-79 Jul-80 Jan-82 Jul-83 Jan-85 Jul-86 Jan-88 Jul-89 Jan-91 Jul-92 Jan-94 Jul-95 Jan-97 Jul-98 Jan-00 Jul-01 Jan-03 Jul-04 Jan-06 Jul-07 Jan-09 Jul-10 Jan-12 Jul-13 Jan-15 Albertarecessionwatch.com
AREAS TO MONITOR Official Unemployment Rate-Alberta 1976- August 2016 14 12 10 8 Unemployment Rate-Alberta 6 4 Source: CANSIM Table 282- 2 0085- Labur Force Survey- Unemployment Rate- 15 years 0 Jan-76 May-77 Sep-78 Jan-80 May-81 Sep-82 Jan-84 May-85 Sep-86 Jan-88 May-89 Sep-90 Jan-92 May-93 Sep-94 Jan-96 May-97 Sep-98 Jan-00 May-01 Sep-02 Jan-04 May-05 Sep-06 Jan-08 May-09 Sep-10 Jan-12 May-13 Sep-14 Jan-16 Albertarecessionwatch.com
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