A few notes:
You are assuming significant inflation in your analysis. I'm not
counting on this. I'm more concerned about deflation, and risk of drops
in price level among certain asset classes - resources, real estate, and
Alberta and BC real estate - being the most likely. We might also see a situation play out with real estate falls in value while in general price levels rise. There's minimal upside, and significant downside... hardest hit will be those that hold multi-family buildings in Alberta and BC.
Continued increases in resource prices is not a given - I do not know
how the future unfolds but here are a few possibilities - Capital
flight, are current valuations at equilibrium based on current and
expected usage or based on financial market bets? will expected usage
come to be? Technological advancements reducing cost? Labour rates
dropping? Less labour needed - ie costs and profits could increases but
job growth does not have to follow from this? I can go on but you
should get the idea...
Population growth in Alberta is not a given. Population growth is
helpful, but even if this happens it does not require price levels in
real estate markets to follow. There are other factors that also
influence this - so for example you can have a scenario with:
Increased supply of units at a lower price - can be due to - lower costs
to build, lower land values, developers taking a hit on projects,
increased cost of debt servicing, tightening of available credit to
future purchasers, increased density per unit (multi-generational
families, roommates, etc..), increased costs of ownership (property tax,
utilities, repairs, etc..)
Even if you have a very rosy outlook on Alberta, which I do not, the question you need to ask yourself before investing is:
Have prices fallen sufficiently over the last few years to hit an equilibrium point?
Markets tend to overshoot on the upside and downside. From the outside
looking in it looks to me like price level's overshot, have fallen, and
have to fall further to be where they should be.... often times
prices will fall even further beyond that.... in Edmonton, Calgary, and a
variety of other areas that make up the frozen wasteland that is
Alberta, this has yet to happen.
Sitting on cash or government bonds allows you to take advantages of
opportunities when they present themselves. This might be in 1 year, or
4, or X. I'm willing to make the bet that the opportunities available in
the future if you have cash available will be a better choice than an
immediate investment. You might not be willing to make that bet and are
hoping that the near term returns above bond rates over the next X years
will provide a higher total return. Time will tell.
The amount of cash available, comfort with risk, etc.. should help guide
an appropriate portfolio allocation - ie someone with lots of $ might
prefer X% in cash and X% with a ladder government bond approach for each
year for X years. It might be more prudent for an investor with little $
to sit entirely on cash as they'll need to be able to pull the trigger
on an investment in the future.