It's not new news that Alberta has been going through quite the rough patch for the last couple of years. No one can seem to stop talking about it while providing their opinion on the matter. There's a reason it's still on the forefront of everyone's minds. This recession is likely to go down as one of the most severe the province has ever experienced, according to reports.
The Gist of Alberta's Recession
Through this recession, Albertans have experienced a tremendous amount of unease. Industries suffered, jobs were lost, and the housing market declined while vacancy rates increased. According to a report from TD Economics, Alberta GDP hit a 6.5 percent loss since the recession first started. To put that number in perspective, that's twice the magnitude of the past four downturns to hit the province.
Residents throughout Alberta felt the crunch of the times as labour markets shrunk. However bad we felt we had it, this recession's impact on the current labour market was much milder than the one felt in the early 1980s. The same goes for the housing market. Real estate prices have taken a much lighter hit than they did in the ‘80s.
Looking Forward to Better Times
To answer the question, most probably yes, the Alberta economy has hit bottom. There's nowhere to go now but up. TD Economics is forecasting an Alberta GDP gain of about 2.3 percent for 2017-18. Job opportunities are also increasing, as the oil patch is slowly hiring more workers to replace the ones who were laid off. In terms of the real estate market, there are still interesting times ahead for the province.
The slowing trend of Alberta's housing market is still not over, and it will not bounce back fast. Once a region's economy has picked up, its housing market lags behind for 18-24 months. While businesses are seeing better days, homeowners aren't. When you look at multi-family properties, this lagging indicator is even longer. Its economic recovery can be delayed another 6-18 months after the housing market one. All things considered, it can be between two to three years before multi-family building activity picks up again.
What this Lag Means for Investors
If you were an investor that prepared yourself and your property for the recession, you're sitting in a good place. You have deeper pockets and have some cash put away to maintain your properties during this period. All you have to do now is maintain a healthy building from a maintenance and vacancy prospective. At this point, you shouldn't be worrying about ROI. You can focus on that when the housing market has picked up again.
If you weren't prepared for this downturn, you have a bit of work to do. You may be struggling with a limited cash flow, so it's not a bad idea to look for partners to get that cash influx. You can sell them on the idea of investing now, and then seeing better returns in five years when the market has stabilized. If your partner invests for a five-year term, you can bring the building to a healthy point and normalize it in two years. When the five-year mark comes around, there will be a huge opportunity for a great ROI.
If you don't yet have a multi-family building but are considering this investment option, now would be the time to buy a property. Right now there are some investors who weren't prepared for this recession and didn't have the money to sustain their building. You'll see more multi-family properties coming on the scene, and it will be a buyer's market.
The Alberta economy is slowly climbing again, but it will be a long time before the real estate market catches up. Investors need to determine their next course of action depending on how prepared they were for this recession.
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