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Provincial Budgetary Cuts in Alberta Not Expected to Affect Real Estate Market More Adversely than Elsewhere in Canada

Published April 14, 2020 by Real Estate Leads

There’s been much focus in the news these days about how Alberta is being hit with a double-whammy with both the precipitous decline in the world price of oil and the economic downturn caused by the Covid-19 pandemic. It’s true that they’re likely in for the roughest patch when it comes to all of the Canadian provinces. We can also safely assume that many of the budget cuts the Provincial government is making there are ones they’d rather not make, but have to given the need to cut expenditure and at least attempt to balance books.

Over the last couple of weeks we’ve discussed how the real estate markets in different regions of the country are going to be taking a similar downturn, but also not to nearly the extent that some people suggest they’re going to. There have been some who’ve agreed with our perspective on that, but added further that they do expect things to be rather dire in Alberta. It is true that more people are going to be out of work, and the market will have fewer qualified homebuyers and greater numbers of homebuyers who may need to sell.

That’s definitely not a good recipe for a healthy housing market, and as is always the case it’s the newer realtors that may feel the pinch the most. New and qualified clients may be even harder to come by. Here at Real Estate Leads, our online real estate lead generations system is an excellent way for any realtor to harness the power of Internet marketing to be put more directly in touch with home owners and prospective home buyers who are genuinely considering making a move in the real estate market.

It comes highly recommended for anyone who feels they might be losing some of their potential in this regard, whether that’s in Alberta or in another part of the country.

But steering back to Alberta, it turns out that the doom n’ gloom scenarios envisioned there also aren’t especially rooted in the reality of what’s likely to happen there. That’s going to be good news, so let’s look at it in greater detail.

Cut-Heavy Budget

The 27th of February was when Alberta’s United Conservative government unveiled its most recent budget, and with it came more than afew surprises. Program spending, despite the province’s growing population, was scheduled to stay relatively unchanged from recent levels. Though it’s not pretty, it’s fair to say the UCP didn’t have much choice other than to use job losses, salary cuts and benefit reductions in the public sector to lower operating costs.  

There wasn’t much good news on the surface of the Alberta budget, but industry insiders are seeing how its job creation component should give real estate investors cause for optimism, particularly with its focus on corporate tax rates and supporting innovation.

Premier Jason Kenney had previously scrapped tax incentives brought in by the previous NDP government to lure high-tech start-ups, but the new budget does put aside $200 million to attract talent in various growing industries, including AI and financial technology. The aim with this is reducing the provincial unemployment rate to 5%.

By creating more employment from this, the government may be able to establish Alberta cities like Calgary and Edmonton to be among the top ten cities in Canada for attracting tech companies and employees.

Then there’s the new corporate tax rate in Alberta, which is going to decrease from its current 12 % to eight % by 2022, and promote investment in the province. The belief is that these tax savings will result in greater internal development, and along with that comes more employment, more purchasing power, and more $ in local economies.

It will take some time, but in the meantime it will do enough to prevent the local housing market from taking a hit that’s decidedly worse than that of other Provinces in Canada.

Checks and Balances

However, that’s in the face of a loss of over 1,400 public sector jobs, and a majority of those being seen in post-secondary education. All on top of the over 50,000 full-time jobs that have disappeared in the province since last June.

Then there’s the many who are questioning the validity of the UCP’s budgetary projections, many of which are based around a scenario where they’re getting USD $58 per barrel price for West Texas Intermediate oil. That’s the farthest thing from reality at this time – WTI is currently trading at less than USD $5.00 per barrel, although OPEC production cuts agreed to last Thursday may provide some help there.

Despite all of this, most economists or real estate industry experts don’t foresee see Alberta’s real estate market falling entirely apart. Experts point out that the worst price depreciation has been two-and-a-half percent annually, and that was just two years ago. The economy is diversifying, and between all of it the industry may be buoyed much more than people think.

Add a population growing, a reduction in the Bank of Canada’s interest rate, and improved efforts to attract new industries, and it’s very realistic to think that things may only be slightly worse for Alberta than they will be for the other provinces dealing with the economic downturn caused by the Pandemic.

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