experts: real estate column Monday, February 14, 2005

Duck Hunting and the Economic Boom

Forecasting is always difficult but Jurock's Real Estate Insider is confident that 2005 will be an historic year for Western Canada. It will be a year that will cement the economic recovery of the past few years.

By Ozzie Jurock

Forecasting is always difficult but Jurock's Real Estate Insider is confident that 2005 will be an historic year for Western Canada. It will be a year that will cement the economic recovery of the past few years. We believe it will also mark the beginning of a long-term economic revival that will benefit B.C. and Alberta real estate markets, both residentially and commercially. B.C. is at an historic point, the old dynamics resource crash and high mortgage rates - don't apply. Low mortgage rates, an up tick in in-migration - from Ontario and Alberta, where housing prices have also risen allowing buyers to relocate to B.C. - $2 billion in transit and projects, a low inventory of new homes, low unemployment and a recovery in virtually every resource sector, will combine and create a unique matrix for the province.

Simply put, barring a natural disaster, there is nothing on the horizon that signals economic rough waters ahead. The fact is, the world is hungry for commodities and for resources, and Western Canada is a major source for what the world, especially power-hungry China, needs. China, in fact, represents the biggest economic sea change in modern history, similar to the industrial revolution of the 1800s or the rebuilding of Europe 50 years ago. This global power shift will transform the world and, for the next decade, resource-rich Western Canada will see major benefits.

OIL AND GAS:

Indications of what is happening is the proposed oil pipeline to run from Fort McMurray to Prince Rupert, as planned by Terasen Inc. and Enbridge Inc. Prince Rupert is the closest West Coast port to China. For investors, towns to get into for long term gains include Prince Rupert, Fort McMurray and Kitimat, which is the second choice location for the B.C. end of the Terasen pipeline. Note: Fort McMurray average rents for a two bedroom is $1,265 per month and there is a near zero vacancy rate.

COAL:

British Columbia's coal industry has re-fired up faster than many thought. Driven by demand in China, it has already sparked the opening of new coalfields in northern B.C. and the reopening of mines that were shut down a decade ago. In Tumbler Ridge, total employment in the coal industry this year will be higher than during its former boom years, with about 1,500 people working in three mines. Tumbler Ridge houses that fire-saled for $20,000 five years ago, now sell for $60,000-$80,000.

FORESTRY BC:

Last year exports of B.C. forest products - which, at $15.4 billion and also represent half of everything B.C. sells offshore - rose 21 per cent. And that was with the softwood lumber duties in place. A strengthening in global demand for pulp and paper exports, particularly from China, will also provide support for both price and shipment levels. B.C. towns that will see stronger economies because of a forestry sector this year include Port Alberni, Powell River and Campbell River, all of which have relatively low real estate prices.

DO'S:

  • Buy in the Lower Mainland: While we are witnessing the Lower Mainland change into a more normal market, long term value is a sure bet. You know, hemmed in by ocean, border and mountains and 1 million more people coming in the next 20 years.

  • As a professional buy your own building. Low rates and low prices, make owning your own building cheaper than rent.

  • Buy all waterfront: Ocean, Lake, and River anywhere.

  • Buy in small recreational towns with zing and future: Black Beach, Chemainus on the Island, Kimberley, Fernie in the Kootenays, Gibsons on the Sunshine Coast. Actually research any small town within two hours of Vancouver.

WATCH OUT FOR:

  • A sudden surge in interest rates of higher than 2 per cent.

  • Overheated pre-sell condo markets downtown.

  • Hotel type condos

  • Timeshares

WHATEVER YOU BUY STICK TO THESE PRINCIPLES:

  • It is never 'the market', but the well researched deal you personally make . Yes, we will see this year ever tighter construction labour markets, where developers will fight for work crews. We will see sharply rising construction costs. We will see a sharp inflow of migration from Alberta back to B.C. We will have rising confidence, thus we look for most real estate markets to still be lucrative and most prices higher in 2005. Remember - you make the most money on the day you buy.

  • House hunting is a little like duck hunting. When duck hunting one has to lead the duck. You have to shoot ahead to allow for the distance the duck is going to fly while your shotgun pellets are getting to him. If you don't you'll always be shooting where the duck was, not where the duck is. Same thing with the real estate market. It is always changing. You have to know what's happening with the aspects involved in your potential purchase and the management of your existing property portfolio.

  • Finally, remember no matter the dire news of the last 30 years in B.C. ... the real estate investor was well off. So, if you buy good selected real estate, manage it well, have someone else pay off the mortgage, you will always benefit. Particularly during this time of low interest rates and high vacancy rate environments. With 25 per cent down most properties today show you a double digit return.
Ozzie Jurock leads the Real Estate Action Group out of Vancouver and can be found at oz@jurock.com and www.reag.ca




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Related Links:

Jurock Real Estate Insider

Real Estate Action Group

Ozzie Jurock

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