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What is Going to Happen to Calgary Real Estate Prices in View of the Events in Japan?

Posted by Rachel R. Vanderveen on Thursday, March 17th, 2011 at 8:42pm.

Sometimes the most wonderful things happen to me, like what happened today. I was surfing Calgary Real Estate News articles around the web, when I happened to stumble upon a LIVE web chat involving Mr. Don Campbell (who I love, love, love!). Although I did submit a comment for moderation, which implored Mr. Campbell to please be my BFF, my comment was not posted. But I did have a carnival of a good time reading Mr. Campbell's responses to some excellent questions that buyers of Calgary Real Estate are dying to know! As I have mentioned before, I would consider Mr. Campbell to be the authority on Real Estate Investing in Calgary and indeed in all of Canada. So here---for your viewing pleasure---are some excerpts from the lively and informative author of Real Estate Investment in Canada, Mr. Don Campbell.

 (This post has been copied exactly in its original format. Please excuse spelling and grammar errors on the author's part, as this is a chat room-type forum. I have made edits only where it was absolutely necessary to understand a thought.)


[Comment From Canadian Investor: ] 
How do you think the terrible events in Japan are going to affect our real estate market here?

 Don R Campbell: 
That leads to a long and convoluted answer as we cannot take just the Japanese situation in a bubble on it's own. As Canadians we must also combine it with what is going on in Middle East, Soon to be Africa and the debt crisis that is floating under the radar in Europe. So... Obviously we are not immune to what goes on in the world... we do need to be realistic about that. However, This is Canada's time to shine. We have what the world will be needing (or already needs) The 3 F's (now becoming the 4 F's after the devastation in Japan). Food, Fuel, Fertilizer & now Forestry. There is NO other stable country in the world that can provide all of these at a continually increasing rate. That is why you have been witnessing the dramatic upswing in foreign money pouring into Canada. Not just our bonds and equities as we read in the Globe today, but also our Energy companies. Right now stable sources are few and far between. This demand is not a blip – sure it won't be straight line growth – but demand over the next decade will be increasing, with shrinking supply.

What this means to homeowners property? Jobs are going to be created in regions that provide these resources. And if jobs are being created, people will move there and if they move there they will increase rental demand, reducing vacancies etc etc. The simplified formula is: GDP growth = brings Job growth = brings Population growth = Increased rental demand (12 months later) = Increased rents = Property purchase demand and (18 months later) = leads to property price increases.

However, don't think that real estate markets are goin gto give clear signals for the next 18 months. No Way. You will hear people screaming that it is going to collapse, you'll hear people saying that it is going to be fine... the messages will be very mixed. Because of the ongoing and progressing situations around the world.

But it is important to get back to the foundation. (remember people scream to be heard, not to inform).


Katherine Scarrow: 
Don -- this next reader is wondering about nuclear issues and power shortages in Japan.


[Comment From Chris Davies: ] 
Do you think the nuclear issues in Japan will increase interest in shale gas plays in Northern BC?


Don R Campbell: 
LNG (liquified natural gas) demand will have to increase. There is no question about it. The electricity will have to come from somewhere and that somewhere in the sort term will be coal and natural gas. Right now there is a glut of gas on the market. Northern BC is unique for 'Shale Gas" only in the fact that it is not surrounded by millions of people. (like it is in Eastern US). This will bring jobs and prosperity to NE BC and NW Alberta


[Comment From kriskris: ] 
Do you think that the events in Japan will have a major impact on demand for SK Uranium?


Don R Campbell: 
Always keep in mind, throughout the decade: The 3 F's (now becoming the 4 F's after the devastation in Japan). Food, Fuel, Fertilizer & now Forestry. Interesting question. Are we speaking of the 'northern Sask real estate market or the commodity itself.


[Comment From kriskris: ] 
Well, both! Decrease in Uranium (major one) would equal a decrease in rental demand in northern/central SK would it not?


Don R Campbell: 
Nice use of the formula! Short term, lots of talk about shutting power plants, however, long term (next 5 years) alternatives wn't be able to be put on-line fast enough to replace it. Remember we are supposed to be entering the time of "Electric cars' and that 'fuel' has to come from somewhere (and Ontario is shutting their coal power plants) Demand will be there for a decade.

Tough choices right now. River Dams, coal, natural gas, wind, solar, tidal. Reality is demand for energy going up - Canadian job growth


Don R Campbell:  
New mortage rules coming:


Don R Campbell:  
New Rules: Important to remember that these rules are only "rules" for any mortgage that has less than 20% equity (down). These rules do not affect conventional mortgages (the majority of mortgage in Canada). Also, the rules for borrowers are still better now than they were five years ago. Here are their new rules Another round of strategic rule changes from Ottawa, specifically targeting the biggest areas of concern: 1. Mortgage amortization periods will be reduced from 35 years to 30 years. 2. The maximum amount Canadians can borrow to refinance their mortgages will be lowered from 90 per cent to 85% of the value of their homes. 3. The government will withdraw its insurance backing on lines of credit secured on homes such as HELOCs. Now one thing to understand is that the majority of secondary lenders, the MBS-non bank lenders, use these rules for their conventional mortgages as well. Obviously we are not immune to what goes on in the world... we do need to be realistic about that. However, This is Canada's time to shine. We have what the world will be needing (or already needs) The 3 F's (now becoming the 4 F's after the devastation in Japan). Food, Fuel, Fertilizer & now Forestry. There is NO other stable country in the world that can provide all of these at a continually increasing rate. That is why you have been witnessing the dramatic upswing in foreign money pouring into Canada.


Don R Campbell:  
Please be an investor not a speculator. See you at my blog www.donrcampbell.com or www.reincanadamembership.com


Rachel Vanderveen

The Vanderveen Team
Maxwell South Star Realty
Phone: 403.253.5678 Fax: 403.592.6736
Email: Info@VanderveenTeam.com

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