Economic Update March 08

1. Mark Herman’s
Economic Update March ‘08
Highlights - Home Prices Continue to Slowly Rise, Interest Rates Should
Hit New Lows by Christmas then Begin to Rise in 2009.
The Bank of Canada has lowered the Prime rate of interest from 5.75% to 5.25% – this is the first
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time the Bank has dropped the rate by more than 1/4% at one time in more than 6 years.
More rate cuts are expected to keep in-line with further rate discounts anticipated in the USA.
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In 2009 inflation is expected to set in and cause rates to slowly rise.
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Home prices will continue to steadily rise back to their levels of one year ago. The average resale
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in Calgary for single-family homes in February, 2008 was up 5% from last year to $448,557.
In Canada, the slowing US economy, a strong Canadian dollar and still healthy commodity prices will
further widen the economic gap between the West and the rest of the country.
Alberta
2007 ended with $25.5 billion in residential MLS sales, up 19.9 per cent compared with 2006, according to
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the Canadian Real Estate Association. This was the largest annual sales growth since 2002. The national
average sale price was a new record and the largest year-over-year price increase in almost 20 years.
2008’s total investment in Alberta – $83.8 billion - is expected to overtake Ontario – $106 billion - in 2
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years and today is attracting more investment than every manufacturing industry across Canada combined.
Oilsands investment is skyrocketing to $19.7 billion reflecting a fundamental change in Canada’s economy.
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The oilsands spending numbers are understated even when manufacturing had it’s best year since 2002.
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Oil regularly closes at greater than $100 a barrel and some economists predict $120 a barrel for 2009.
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Canada’s crude oil and equivalents output broke the 1 billion barrel mark for the first time in 2007. More
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than 80% of all production is from Alberta.
The average rent in Ft. McMurray for a 2 bedroom apartment is $2,085, and the vacancy rate is 0.3%.
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Mark Herman Accredited Mortgage Professional Mortgage Alliance
Mobile: 403-681-4376 Toll Free Fax: 1-866-823-1279
7142 36 Avenue NW, Calgary, Ab, T3B 1T8

2. Mark Herman’s
Economic Update March ‘08
Calgary
• $24 billion of capital projects are planned or
underway, with 57 existing projects over $100
million; the Calgary Health Region South
Campus, Bow Office Tower, Ramsay mixed-use
development, and the Penny Lane complex all
ring in at over $1 billion each.
• The labor market in Calgary will remain tight
until at least the end of 2009 due to large ongoing
construction projects.
• Office real estate lease rates continue to rise to
record levels – they are currently at $43.90 per SF
for “A” space - despite the new energy royalty
system causing some tenants to be more cautious.
• Industrial real estate vacancy rates tightened to
0.7% as raw land supply is far behind demand.
Fully serviced land prices average about $600,000
/ acre.
Calgary’s Residential Rents
• Calgary’s residential rents are now at $1,089 for a
2 bedroom apartment - the highest in the country,
up 34.8% in the last 2 years surpassing even
Vancouver’s rates of $1,061 for 2007
• A total of 1,900 units – 1,570 apartments and 347
row units were spun from rental stock into condos.
In total almost 3,000 rental units in Calgary were
turned into condos in 2 years.
• Calgary lost 2,500 rental units in 2007 to condo
conversions
Edmonton
• For the first time Edmonton toped the city ranking under the Metropolitan Economic Activity Index in
term of economic momentum. Strong population growth - second only to Calgary- impressive
employment gains, low unemployment rate, and well below average corporate and personal bankruptcy
rates combined to boost Edmonton to its current ranking.
• The recent slowing in housing market activity in Alberta reflects rising prices as well as a natural
slowing from an unsustainable pace of improvement observed earlier in the year.
• Calgary ranked second in the metropolitan economic activity index. The city still leads the nation in
population growth, unemployment and consumer bankruptcy rates are the lowest among all other cities.
• The recent softening in momentum is from an extremely high level of activity. In fact, Calgary’s ability
to continue to show strong momentum from such elevated levels of activity is impressive.
Mark Herman Accredited Mortgage Professional Mortgage Alliance
Mobile: 403-681-4376 Toll Free Fax: 1-866-823-1279
7142 36 Avenue NW, Calgary, Ab, T3B 1T8