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RBC Affordability Report Sept 2010

wgraham

wgraham

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REIN Member
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Sep 14, 2007
Messages
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Here is a link to the RBC Affordability report. http://www.rbc.com/economics/market/pdf/house.pdf

All serious investors should be reading this one!

What is your market doing?

Calgary undervalued? I think we will still see more of a price correction this winter.....but I have been wrong before (not often mind you
)
 
Here`s my favorite excerpt from this report:

"Overall, homeownership
remains affordable in Alberta, with RBC Housing Affordability Measures at
or below long-term averages. This situation implies little downside risk to
the market and augurs well for a strengthening in housing demand once the
provincial job market shows more substantial gains.
 
QUOTE (RedlineBrett @ Sep 28 2010, 03:22 PM) Here`s my favorite excerpt from this report:

"Overall, homeownership
remains affordable in Alberta, with RBC Housing Affordability Measures at
or below long-term averages. This situation implies little downside risk to
the market and augurs well for a strengthening in housing demand once the
provincial job market shows more substantial gains.


One Calgary expert expects DOWNWARDS pressure (Wade) and one (YOU) an upwards pressure .. who is (more) right ??

I`d side with you as I see job gains and as such strengthening in-migration and demand !
 
QUOTE (ThomasBeyer @ Sep 28 2010, 05:21 PM) One Calgary expert expects DOWNWARDS pressure (Wade) and one (YOU) an upwards pressure .. who is (more) right ??

I`d side with you as I see job gains and as such strengthening in-migration and demand !

I think Wade is talking short term... like in the next six months or so. We are heading into what is traditionally the best buyer`s season of the year.... the dead of winter.
I`m confident Wade sees long term growth in Calgary. His business is based there like mine is!
 
QUOTE (RedlineBrett @ Sep 28 2010, 09:20 PM) I think Wade is talking short term... like in the next six months or so. We are heading into what is traditionally the best buyer`s season of the year.... the dead of winter.
I`m confident Wade sees long term growth in Calgary. His business is based there like mine is!

Yes I am certainly talking short term (6 months) and we will be buying more assets this winter as everyone else is sitting on the sidelines and drinking eggnog. Long term job creation is on the rise and thus home values.
 
QUOTE (housingrental @ Sep 29 2010, 11:58 AM) Ill provide a third opinion - you`re all wrong
Nothing but downside risk at this point

Hi Adam,

I trust you have liquidated all of your assets then and are sitting in cash if there is only downside risk?
 
QUOTE (housingrental @ Sep 29 2010, 11:58 AM) Ill provide a third opinion - you`re all wrong
Nothing but downside risk at this point

Make sure you draft a fax/memo to RBC and let them know too. CC REIN and its top ten markets report while you are at it
 
QUOTE (housingrental @ Sep 29 2010, 10:58 AM) Ill provide a third opinion - you`re all wrong
Nothing but downside risk at this point
why ? crashing oil prices ? tight bank lending ? double dip US recession ? huge ex-migration from Calgary to PEI ? elaborate with FACTS please !
 
Perhaps housingrental has been reading Garth Turner`s blog. He and his following (most of them) see nothing but downside risk for a long time. see www.greaterfool.ca

It`s hard to know which side will be right. There are good arguments for both sides.
 
QUOTE (Keopele @ Sep 29 2010, 01:57 PM) There are good arguments for both sides.
are there ? which ones ?
 
QUOTE (ThomasBeyer @ Sep 29 2010, 04:34 PM) why ? crashing oil prices ? tight bank lending ? double dip US recession ? huge ex-migration from Calgary to PEI ? elaborate with FACTS please !

Speaking for myself, any discussion about the future never involves facts. It`s all entertaining speculation. My POV only of course!
 
QUOTE (wgraham @ Sep 29 2010, 02:14 PM) Hi Adam,

I trust you have liquidated all of your assets then and are sitting in cash if there is only downside risk?

Believing in future downside involves liquidating everything as much as believing in future upside involves buying everything.

That`s only my POV of course.
 
Wade – No to liquidating. But sitting on cash is prudent. This allows you to take advantage of opportunities as they present themselves. The problem with selling are the costs – realtors fees, lawyers fees, capital gains tax – and then you have to sit on money at a low rate of return in cash or bonds until valuations adjusts. If you have a poor quality product, its currently operating at a below 6% cap rate, are highly leveraged, it still might be worthwhile to consider selling at this point.

Brett – Unfortunately REIN doesn’t always appreciate the unique perspective I provide. Perhaps you can send in the memo?

Thomas – Lower resource prices. Lower building costs. Weaker economy. Reduced demand – ex-migration + increased occupancy (ie multi-generational families, roommates, etc..)

Keopele – No sir. I don’t think the world is ending. I think there are material downside risks over the next few to ten years throughout most areas in Canada. Alberta especially.

Rickson – Every time I read your posts, I appreciate you more and more.
 
QUOTE (housingrental @ Sep 30 2010, 11:08 AM) ..Alberta especially.
..
have you ever been in Alberta ? Why this negative view ?

Alberta is the province with the highest in-migration in Canada, the lowest debt/capita, the lowest deficit/capita, the biggest oil reserves per capita in Canada (a free $70,000 gift to all who move there .. namely the share of royalty revenue !!), the 2nd largest oil reserves on the planet, the lowest gasoline and energy prices in Canada, the lowest corporate and personal taxes .. and no PST ???
 
QUOTE (ThomasBeyer @ Sep 30 2010, 12:20 PM) have you ever been in Alberta ? Why this negative view ?

Alberta is the province with the highest in-migration in Canada, the lowest debt/capita, the lowest deficit/capita, the biggest oil reserves per capita in Canada (a free $70,000 gift to all who move there .. namely the share of royalty revenue !!), the 2nd largest oil reserves on the planet, the lowest gasoline and energy prices in Canada, the lowest corporate and personal taxes .. and no PST ???


One point you overlooked: Most of Alberta`s "Royalty Revenue" gets shipped off to other provinces in Canada - especially Quebec - in the form of transfer payments. So the Albertans work hard and save, while the Quebecers play hard and spend. It`s a perfect symbiotic relationship. Sort of like a fish and a leech. Or a deer and a wood tick.

Anyway, my point is that nobody in Alberta will ever see any of that $70,000 "free gift". But Quebecers likely will.

Alberta is supposedly the richest province, but why does Quebec have free daycare and is able to find money to build a brand new NHL hockey arena for a team they don`t even have?

Okay, my rant is over...
 
QUOTE (Goodstuff @ Sep 30 2010, 01:37 PM) ..

Alberta is supposedly the richest province, but why does Quebec have free daycare and is able to find money to build a brand new NHL hockey arena for a team they don`t even have?
The main reason is so we can listen to French announcement on flights between Edmonton and Vancouver or Halifax and Calgary. The 2nd reason is so we can keep the illusion of a bi-lingual country alive .. and the 3rd is so we can keep the capital in (bilingual) Ottawa !

But perhaps Danielle Smith will be a known person outside of Alberta in a year or 2 .. Canada`s "Sarah Palin" .. let`s wait and see, oui ??
 
No. Re my other posts my Canada ends at Temagami.

The negative view as rent to purchase is very (and historically) low in most area`s.
As cost of operations outpace revenue gains (through costlier utility, property tax, and financing charges) and returns offered on alternate investments improve values will drop.

The issue is Canada wide.

Investing in Alberta add an additional level of risk for the Canadian investor due to exposure to resource markets. Alberta might be an appropraite choice for a large investor with signficant holdings in other provinces but most should be running for the exits. If you live in Alberta, chances are your fortunes are already somewhat tied to this - be it through your personal residence, your job, or indirectly through spin off impact on your business. Focusing on investing in Alberta real estate would be similar to a Nortel employee in the 90`s betting there entire savings on its stock. They also claimed they were basing there investment decision on facts, and had historical performance data to justify there perspective to themselves.

The truth is for portfolio allocation, Alberta should be of though of as being similar to gold - potential to have a small portion of funds tied up in it if you want the bet but not the basis of a sound investment strategy.


QUOTE (ThomasBeyer @ Sep 30 2010, 02:20 PM) have you ever been in Alberta ? Why this negative view ?

Alberta is the province with the highest in-migration in Canada, the lowest debt/capita, the lowest deficit/capita, the biggest oil reserves per capita in Canada (a free $70,000 gift to all who move there .. namely the share of royalty revenue !!), the 2nd largest oil reserves on the planet, the lowest gasoline and energy prices in Canada, the lowest corporate and personal taxes .. and no PST ???
 
QUOTE (housingrental @ Oct 3 2010, 09:33 AM)
..



Investing in Alberta add an additional level of risk for the Canadian investor due to exposure to resource markets. ..


Your opinion is noted. Consider that resources are physical assets that cannot move !!



Capital can move quickly .. as can people !



Resources in the ground (be it oil, gas, water, coal, uranium, nickel, potash, grain or trees even ..) cannot move !



Thus, any economy based on resources in a world with more and more people will do VERY well until 2050 when the world population is expected to peak !!



In addition the oilsands, newly relabeled "Ethical Oil", is a fairly new economically accessible and HUGE resource .. and as such Alberta is well positioned to have high incomes and thus high real estate prices for decades to come !



You cannot ignore the fact that this resource is HUGE .. A GAME CHANGER .. namely the 2nd largest in the world .. and the world's largest privately developable oil field !!



Godfried has some good commentary here: http://myreinspace.com/public_forums/Real_Estate_Discussion/62-18302-Alberta_House_Prices_OVERVALUED.html complementing my thoughts !
 
QUOTE (ThomasBeyer @ Oct 3 2010, 07:14 PM)
Your opinion is noted. Consider that resources are physical assets that cannot move !!



Capital can move quickly .. as can people !



Resources in the ground (be it oil, gas, water, coal, uranium, nickel, potash, grain or trees even ..) cannot move !



Thus, any economy based on resources in a world with more and more people will do VERY well until 2050 when the world population is expected to peak !!



In addition the oilsands, newly relabeled "Ethical Oil", is a fairly new economically accessible and HUGE resource .. and as such Alberta is well positioned to have high incomes and thus high real estate prices for decades to come !



You cannot ignore the fact that this resource is HUGE .. A GAME CHANGER .. namely the 2nd largest in the world .. and the world's largest privately developable oil field !!



Godfried has some good commentary here: http://myreinspace.com/public_forums/Real_Estate_Discussion/62-18302-Alberta_House_Prices_OVERVALUED.html complementing my thoughts !




Interesting thread.



I think a read of Don Coxe 's summer 'Basic Points' would be valuable for all concerned. He is commodity obsessed generally.



Adam, I like the fact that you stir the pot - not always sure if it is just to get a reaction or not - a read of pages 17 to about 20 in particular would be very interesting.



BTW, isn't Temagami, that Japanese paper folding stuff (just kidding - had family there at one time).



http://www.zerohedge.com/sites/default/fil...s_June_2010.pdf
 
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