Here is some additional food for thought. I will use for Example Kelowna vs. Edmonton. Currently it is a tale of two cities. One has had prices and rents fall significantly since 2014 and has bottomed out in 2017. The other has seemingly perpetual rent increases, massive price gains, and near zero vacancy. Wages are higher in Edmonton, a ton of industry, and you can rent for in many cases 40% less than what you would pay in Kelowna. In Edmonton if you purchased in 2014 you have now seen your rents drop 15-20% and you are likely struggling. It is therefore not reasonable to pay Kelowna's inflated prices as the expectation to hold the current high rent levels is far from assured going forward. BC has been in an impressive economic run the past few years, where Alberta has been in the toilet. I predict a price correction down for BC, and slight gains for Alberta in 2018-2019. A few more points on my mind that I would love to hear feedback on.
- if you had invested cash in Edmonton and Kelowna in 2007, you were likely back to the positives by 2012 in Edmonton, Kelowna by 2015. The cycles up and down seem more severe.
- Edmonton is 4 times the population, with many rent and housing options.
- wages are significantly higher in Edmonton than they are in Kelowna, a solid industry base, and there are very few high paying jobs here by comparison.
- mortgage qualification just got a lot tougher with increased rates and new criteria hence less buyers (investors and home owners).
- BC has rent controls and there are talks of reducing increases even more.
- The NDP government in BC has already shown its intent to stall the economy and raise taxes, including the carbon tax.
- The NDP government in Alberta will be toast in 2019, and pro economy policies will resume.
- There is a massive building boom of condos, similar to 2007 taking a long time to absorb. Many will become rentals hopefully easing the rental crunch.
Will the run continue for another year, two, perpetually? Or is an adjustment imminent? I think if you are buying you should stress test your mortgages for 2% higher, and have significant cash reserves to sustain rent decreases, and take a long position of 7-10 years at least. Yes I get the argument that it is a desirable place to live, but it was a desirable place to live back in 2008 as well.