After another astonishing year with an average 30% increase in Lethbridge real estate prices, the question is what will happen in 2008? Right now, we are hearing projections of 10-15% increases, but let’s look closer at the situation.
Inventory is the main driving force behind property price increases. Our typical inventory would be in the region of 500 homes. Last May this shrank to only 100. Not surprisingly, bidding wars broke out and prices soared. Today, we have about 450 homes listed and a degree of sanity is returning to the market. September actually saw a small drop in average prices, as some owners needing to sell quickly, lowered their prices. However, October saw a general upturn in sales. Of course, fall and winter are typically slow months and hardly indicative of the market in general.
Perhaps we should first look at the state of Alberta’s economy. The fact is, all the fundamentals for a healthy real estate market are still in place. Including historically low interest rates; a steady inflow of people and capital; a strong job market and a booming oil patch.
Alberta is ideally placed in the energy sector. In a world of diminishing oil reserves, we have abundance. Add to that our suitability for wind generated electricity and a proposed new nuclear power plant at Peace River and it seems we are in good shape. Oil royalties are to be increased, but would an oil company making $2.5 billion, really pull out because their profit was reduced to a mere $2 billion?
Alberta tops all other provinces when it comes to population growth. In the latest Statistics Canada data, Alberta’s growth was three times the national average. Calgary’s development is now greater than Vancouver, Winnipeg and Ottawa combined. Surprisingly, as a percentage, the rate of population growth is actually slightly greater for Lethbridge than for Calgary.
Sub-Prime Mortgages in the US. Bad management by some US lenders has caused a credit crunch in the US. Put simply, mortgages were given to people who could barely afford to pay them. When interest rates rose beyond rock bottom levels, these individuals went into default, and foreclosures followed. However, Canadian lenders are far more conservative and home buyers must show a great level of solvency before being given loans. Also Canadian interest rates have been less susceptible to fluctuation.
Conclusion. If we look at the factors above and consider that other investments such as stocks are presently unpredictable, it would seem reasonable to expect 2008 to be a good year for real estate in Lethbridge. An increase in inventory will make it easier for buyers to find a suitable home and investors should still find real estate a solid investment for years to come.
For additional information about Lethbridge Real Estate, and to view all MLS listings, please visit my primary web site: www.TeamMiller.ca
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