reasonable rate of growth in edmonton

[albainstar]

Opinions on the realistic, reasonable /expected rate to use when calculating the expected price growth of a property in Edmonton right now?

 

[MonteDobson]

For our property analysis, we use a conservative figure of 6% per year for the next 5 years. This equates to an approximate return of 33% per year based on a 20% down payment; not factoring in any cashflow, expenses or mortgage paydown.

 

[Thomas Beyer]

QUOTE (albainstar @ Jul 8 2008, 11:58 AM) Opinions on the realistic, reasonable /expected rate to use when calculating the expected price growth of a property in Edmonton right now?

depends what you pay in 2008 over 2007 .. I`d say:
2008 (over 2007) = -10 % (yes minus)
2009 (over 2008) = 0 (yes flat)
2010 (over 2009) = 3%
2011 and forward 3-6% ..or 4.5 % on average

This assumes no liberal or NDP government induced NEP 2 on the Alberta oilsands.

It also assumes no China - US pissing contest over carbon taxes or (carbon based) severe import duties on Chinese goods into the US .. which is a possibility under Barack Obama and a left leaning democratic US house/senate with overall worldwide slowdown in demand for oil, energy, products and negative GDP growth in all G8 nations and severe reduction in Chinese GDP growth !

 

[albainstar]

i was thinking about the same, really low growth for the next year or so,
so if looking at properties projected roi should we just be using zero for the appreciation and basing our decisions on the property as it is - rent vs mortgage pmts and expenses?

that takes roi from somewhere near 30 percent to something much much lower
but is it the responsible way to be looking at the Edmonton market right now?

 

[GarthChapman]

I like Thomas` numbers.

We tend to predict the future based on the past rather than looking ahead at what is or may be coming at us. Real Estate is always a great long-term performer, and while our Alberta 30-35 year average returns are around 8%, when you look at it year by year it is more volatile than you would have guessed.

 

[albainstar]

I am looking at a JV in Edmonton that is using 7 percent growth, and projecting 35 percent annual roi - however if you take that growth to a realistic # I wont make that in the 3-5 year it may be much less

So I guess what I am asking is opinion if I should still go ahead or look in another city

 

[Thomas Beyer]

QUOTE (albainstar @ Jul 9 2008, 12:16 PM) I am looking at a JV in Edmonton that is using 7 percent growth, and projecting 35 percent annual roi - however if you take that growth to a realistic # I wont make that in the 3-5 year it may be much less

So I guess what I am asking is opinion if I should still go ahead or look in another city
7% annually for 5 years is UNREALISTIC ... unless you buy an inexpensive WELL below market condo or single family house on the cheap !!

example: house was $400, 000 at peak late spring 2007.
Value now is $360,000
maybe you buy smart and buy @ $320,000. Then yes, it could go up 35% to about $432,000 in 5 years .. or using my values
it would be
360,000 in 2009
370,000 in 2010
387,000 in 2011
404,000 in 2012 (finally reached peak value 5 years after peak .. fyi !!)
423,000 in 2013

 

[tommypal]

Thomas,

Very realistic predictions based on inventory levels and reduced sales figures. Do you have any predictions on Calgary going forward?

 

[albainstar]

ok thanks for all the help and advice
I think I will keep looking for another JV

Ps is 5 percent a good rate to use in other cities?

 

[GarthChapman]

QUOTE (albainstar @ Jul 9 2008, 11:16 AM) I am looking at a JV in Edmonton that is using 7 percent growth, and projecting 35 percent annual roi - however if you take that growth to a realistic # I wont make that in the 3-5 year it may be much less

So I guess what I am asking is opinion if I should still go ahead or look in another city


As to whether you look in `another City` I suggest you make that decision based on the economic fundamentals. That in fact should be one of your first filters when deciding where to invest in Real Estate.

Once you have decided on the Cities or markets you want to invest in, then you should do your due diligence and ROI analysis on each deal you consider. I suggest you apply the appreciation you expect to to occur to the numbers and then decide based on how the adjusted ROI fits in to your own goals.

Hope that helps a bit,

 

[BlueRibbonPartnerships]

Hello Thomas,



I read all your posts and enjoy them very much – thank you.



Sure there is a glut of properties on the market today in Edmonton, however the economic fundamentals are still strong and should remain that way over next 5 years especially with all the major projects in and near Edmonton, and Alberta. This should increase the population in Edmonton and thus increase rents and providing decent appreciation (say 5%) higher then the average city.



If you have a moment could you please elaborate on you selection of percentages per year?



Note: I do realize that we are not fortunetellers…



Thank in advance for your time,

Peter Jacobs

 

[Thomas Beyer]

QUOTE (tommypal @ Jul 10 2008, 11:26 AM) Thomas,

Very realistic predictions based on inventory levels and reduced sales figures. Do you have any predictions on Calgary going forward?

not specifically .. as we focus on Edmonton and area .. but usually it is similar .. so you can`t expect Edmonton to go +9% in a certain period (say 2 years) and Calgary - 12 % .. they are more or less mirrored .. sometimes with a slight lag .. so for example, Calgary went up significantly in 2005-2007 and then Edmonton followed at a similar rate