briefing_note_6_calgary_real_estate

8/7/2019 briefing_note_6_calgary_real_estate

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B r i e

f n g N o t e

S e p t e m

b e r 2

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Summary

Te Calgary real estate market slumberedlong be ore roaring to li e in recent years. Tedramatic and sudden change has lef many

wondering whats next? Our research indicatesthe uture o residential real estate in Calgary is

or modest price increases keeping up with thegeneral level o in ation or the next 5-10 years.Te Commercial market is expected to see high vacancy rates slowly diminish over the next 5-10years with rents slowly rising rom lows that areexpected to hit in late 2011.

Introduction

Municipalities in Canada are interested in realestate prices. Prices indicate how attractive aregion is to reside in. Tey indicate current and

oreshadow uture economic per ormance, andmost importantly or Canadian municipalities,provide revenue opportunities through property taxation. Construction starts are also watched asthese represent opportunities or revenue romdevelopment and building permits and licences,

but a large share o municipal revenues comerom property taxes so prices are the key real

estate variable or Canadian municipalities.

The City of Calgary provides this information in good faith. However, the aforementioned organization makes no representation, warranty orcondition, statutory, express or implied, takes no responsibility for any errors and omissions which may be contained herein and accepts noliability for any loss arising from any use or reliance on this report. The views expressed here represent the views of the authors and do notnecessarily represent those of The City of Calgary.

Briefng Note #6

Calgary Residential and Commercial Real EstateMarkets

.O. Box 2100, Stn. M, #8311, Calgary, AB, Canada T2P 2M5

algary.ca/economy call 3-1-1

Tis paper reveals research that has been doneto shed light on the movement o prices in theCalgary real estate markets over time, with a viewto predicting those price change in the uture.We investigate only residential and commercial

markets in this paper as they represent the coresources o property tax revenue in Calgary.

Real Estate Economics

Much has been written about land economics, thenancial minutia o real estate transactions and

there are hosts o bodies engaged in orecastingreal estate market activities rom CMHC toeranet. Tis paper reveals our research into the

Calgary market exclusively, and does so in anaccessible manner. Readers interested in moredetail o the theoretical underpinnings o thiswork may nd a good general description o real estate economics at http://en.wikipedia.org/wiki/Real_estate_economics.

Corporate Economics occasionally publishes brie ng notes to help interested readers understand the economy. Most of our brie ng notes are highly technical and are geared toward an audience that is aware of the current

economic state of Calgary, Alberta, Canada and the world. Tis note is part of our non-technical series aimed at introducing the Calgary economy to interested readers.


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September 2010

Briefng Note

2

Residential Market

Prices in the Calgary residential market have changedsigni cantly over the past 20 years.

MLS Housing Prices in Calgary(1973 2010)

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thousands of dollars

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Note: Average sale price, all MLS.

Alberta su ered a recession in the early 1980s as a resulto the National Energy Program. Tis caused some out-migration and stagnation o house prices or almost adecade. Te market was starting to recover in the early 1990s with prices escalating at an annual rate o 10% whenthe 1992 recession hit, causing another out-migrationand another period o zero price growth. Prices began

recovering again in 1997 and until 2004 average priceescalation was almost 7% per year. Although this lookedlike a strong recovery compared to the previous 15 years,house price increases were in act only treading water.From 1971 to 2004 average house prices in Calgary increased by almost 8% per year, including the twoperiods when there were no price increases.

In 2005-2007 Calgary house price increases averaged24%, peaking in 2006 at 39%. Since then they havebacked o somewhat recording a 9.4% decline in 2009.Te questions o interest are: was this normal and whatdoes the uture hold? o answer these questions wemodeled the Calgary real estate market to nd out what

actors were responsible or the recent rapid price change.What ollows is a summary o the most important actorsand an estimate o how much they impacted residentialhouse prices in Calgary.

Public Policy Public policy has the greatest impact on prices inCalgary. When the National Energy Program (NEP) wasannounced in 1981 average house prices in the Calgary residential market collapsed. Tey then languished ordecades, so long in act that some researchers even now 1 believe those depressed prices should continue to be thenorm or Calgary. Calgary prices did not start to recover

rom the NEP until 1997 and by 2006 they still had notully recovered.

Recently prices rose dramatically and public policy had a signi cant part to play. While house prices werecontinuing to correct rom their undervaluation causedby the afermath o the NEP, CMHC began changing itsrules regarding the amortization period o mortgages itis willing to insure. Starting in late 2005 CMHC o eredinsurance or 30 year amortized mortgages, a signi cantincrease rom the standard 25 year mortgages o the day.

In late 2006 insurance was o ered or 40 year terms andin late 2008 the ederal government imposed restrictionson insurable mortgage terms through CMHC. Tegeneral rule now is that a maximum o 35 year terms

1 Canadas Housing Bubble, David Macdonald, Canadian Centreor Policy Alternatives, August 2010


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September 2010

Briefng Note

4

By looking at the a ordability index we see thatin-between 2004 and 2009 there were wide swings inprices - both up and down - which can not be explainedby public policy and income alone. Explaining theseprice changes requires looking into demand and supply dynamics, it requires looking into the impact populationchanges had on the local Calgary market.

Population

Population is a signi cant determinant o the demandor housing but its not as simple as adding up the total

number o people and saying this is the demand orhousing. We need to look into what makes a household.

Population (1988 2009)thousands of persons

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Te rst de ning characteristic o housing is thathouseholds o one or more people live in dwellings.Household ormation traditionally occurs when somepeople get together and decide to orm a single economicunit. Whether that be husband and wi e or anotherarrangement the de ning characteristic has been

that a new household consists o at least 2 people andrequently more. When ormed, it is the household unit

that demands housing. Increases in household units,rom both local ormation and rom net in-migration,

have resulted in increased demand or about 11,000units o housing per year over 2004-2009 in Calgary.

Tough traditional household ormation continuesthere is another type o household in Calgary that isnow prevalent in signi cant numbers. Almost 100,000

people in Calgary currently reside in single personhouseholds. Further, real estate ownership rates havebeen rising lately, particularly among young people 2 and particularly or condos. Recently the populationdemographic o 25-34 years old jumped due to thebaby boom phenomenon while Calgary experiencedproportionately greater increase in this demographicas a result o in-migration. About 3,000 dwelling unitsper year have been sold to young singles since 1997. Asa result o servicing this market segment the averagehousehold size in Calgary has dropped rom about 2.5to 2.4 persons over the past 13 years.

o a air extent rapidly changing prices in Calgary overthe past ew years are the result o supply and demanddynamics in servicing the young single market segment.Te story is that demand or new housing picked up in1997 with the end o the last recession. Pent up demand

or single amily housing needed to be satis ed. At thesame time there was a di erential property tax rateincentive to convert apartments to condos and rents had

risen in Calgary so much that the price point to own aconverted apartment was equivalent to rent. Many choseto own and hoped to build equity rather than throwmoney away renting.

2 Adrienne Warren, Scotiabank Group Global EconomicResearch, Global Real Estate rends March 23, 2010


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September 201

Briefng Note

From 1988 to 2004 the 25-34 age cohort group had arelatively stable 170,000 members in Calgary. 2005 sawsudden growth in this age group and over 2005-2009an average 204,000 people in Calgary were members o this group. It was a per ect storm o migration o youngworkers while a disproportionately large population o people born in 1980 3 and already present in Calgary entered the household ormation age cohorts. It wasimpossible to supply the demand o this rapidly risingage cohort when the construction industry was already going ull speed and dramatic price spikes resulted in2006 and 2007. By early 2007 the construction industry had increased its capacity and a record number o housing units were under construction with 17,046housing units started in 2006. Most o these units werestill under construction when the rst signs o recessionhit in mid 2007. By 2009, growth in the 25-34 age cohortgroup stopped and demand or housing stabilized.

25 34 Age Cohorts (1988 2009)thousands of persons

180200220


140160180200220


100120140160180200220


6080

100120140160180200220


0

20406080

100120140160180200220


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100120140160180200220

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100120140160180200220

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3 Calgary had a small baby boom just be ore the NEP wasannounced and over the years many people have migrated toCalgary with their children, a disproportionate number o which happened to be born around 1980

Prices in Calgary peaked in mid 2007. Since then theyhave uctuated as the balance between supply anddemand have uctuated. Te market currently sits withabout 40,000 units, mostly condos, owned and occupiedby singles. Tis is not sustainable and hal o these unitsshould be considered as supply that can enter the marketimminently when these people orm households. Inaddition, there is an unknown number o units held by investors which are currently being rented, or are sitting vacant, which could enter the market when the price isright.

Te outlook is or household ormation age cohorts (24-35 years old) to show very little growth or at least thenext 5 years. As a result o the recession, the demographicoutlook and the act that so many condos are currently owned by singles there is likely to be little demand onew condo developments or several years to come.

Construction Costs

Te standard economic analysis o residential real estateindicates that in the short run prices are quite responsiveto changes in construction costs. In the longer timehorizons, however, this sensitivity disappears as buildersoptimize their mix o inputs. As things like materialsbecome more expensive builders substitute or di erentmaterials, use designs that require less materials or useconstruction techniques that require less labour to makeup or the increased materials costs 4. Our analysis takesthe investigation one step urther. Instead o looking

to supply as being driven by the prices o inputs likematerials we look to the driving orces behind thoseprices. Energy is the key housing construction cost variable.

4 http://en.wikipedia.org/wiki/Real_estate_economics


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September 2010

Briefng Note

6

Oil Price (1988 2009)US$/bbl

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A house is a roo , a oor, walls, carpets, counters, sinksand a host o other things all put together in a pretty package, but what a house really is - is energy. Energy to cut trees down, strip them, transport them to a mill,

mill them into timbers, transport them to a job site, lifthem in place and secure them together. Te energy inmanu actured and delivered materials, site preparation,and hiding in labour itsel , makes up the vast majority o construction costs. Our models utilize the price o oilto measure how changes in energy costs a ect housingprices in Calgary. On average a US$1/bbl change in theprice o oil results in average house prices going up by around $500. o put this in perspective, compared to2005, the oil price spike o 2008 added about $35,000

to the average house in Calgary. Roughly 15% o theincrease in house prices in Calgary over 2005-2008 waspurely cost driven.

Factors that Dont Matter:Tere are other actors that one would think shouldhave in uenced market prices in Calgary over the years.Surprisingly they have had little impact. Here is a shortlist and explanation why they have had little impact.

Interest rates

It would seem obvious that as interest rates rise the costto service a mortgage rises so rising interest rates mustput downward pressure on prices. However, thats notquite the way it is. When the Bank o Canada raises thebank rate the Prime lending rate adjusts automatically but it is up to individual banks to decide i they willchange their mortgage rates. Usually they do, but notalways and not always by the same amount as the Bank o Canada altered the bank rate. So there isnt a stronglink between the Prime lending rate and mortgage rates.Rather there is only a general trend that when the Bank o Canada raises the bank rate and the Prime rate goesup, it generally becomes more expensive to service amortgage.

Prime Rates and Mortgage Rates(1973 2009)

25


Canadian Prime Rate

per cent

20

25


Canadian Prime Rate5Year Conventional Mortgage Rates

per cent

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per cent

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per cent

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per cent

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per cent


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September 2010

Briefng Note

Meanwhile when builders and suppliers need to borrowto build houses they generally borrow at the Primelending rate so when interest rates rise their costs go up.Tis result in upward pressure on house prices.

Who wins? Te pressures seem to be pretty wellbalanced most o the time so that when the Bank o Canada changes interest rates it does not afect houseprices in Calgary. I interest rates do impact house pricesit would seem that interest rate increases cause Calgary

house prices to go up - by about $400 per quarter percenthike in the prime lending rate, but the evidence o thisis very weak.

Planning / Building Codes

Tere is a general sense that planning rules determineprices more than anything else. Tough there is a certainamount o land in an area it is the municipalities plansthat determine which parcels may be utilized or whichpurposes, thereby limiting the amount o land that is

available or any particular purpose within a given area.For example, rules in Richmond B.C. designating certainland as armland have been blamed or high house pricesin Vancouver. Similar arguments have been made acrossthe country and the logic seems to have some validity at rst glance. However, the only evidence supporting itis that certain parcels would be worth diferent valuesi they were zoned diferently and it seems logical thatthis should extend across properties. Un ortunately all this amounts to when we aggregate it across all

properties in a municipality is pure wish ul thinking. Allthis argument says is property values in a municipality would be diferent i the entire municipality werediferent, and that is an extreme proposition that justisnt realistic. More realistically is the possibility o therebeing signi cant changes to property values rom single,discrete, rule changes.

Planning rules in Calgary have been airly consistentsince 1988, but there have been three signi cant rulechanges recently which have the potential to impactprices or land in Calgary.

Te rst change was a building code change that requiresthe installation o exterior drywall to enhance reprotection or single amily houses constructed within6 eet o each other. It was widely reported last year thathis would increase the construction costs to build such

units by $10,000. We have not been able to measure achange in house prices that corresponds to this reportedchange in construction cost.

Te second change is a recent ruling by the City thatnew developments will absorb a greater share o the costto install their water and sewer service. At 25 units peracre (UPA) the increase in cost sums to about $8,000 perdwelling. As this rule change has not come into orceyet we are not surprised that we have not been able tomeasure it afecting market prices yet.

Supply orces do not set prices alone. It is the interplayo demand, the appetite o consumers to accept pricechanges, that must also be considered. Tese three rulechanges will undoubtedly increase the cost to constructhousing in Calgary, however, currently the market avorsbuyers rather than builders and as such builders havelimited opportunity to pass these cost increases on. It islikely that these cost increases will be passed on i andwhen the market turns to avor builders over buyers.

Un ortunately, by then the passage o time will make iimpossible or us to point to a particular rule change andsay that house price increases today are the result o thatbuilding code rule change several years ago.


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September 2010

Briefng Note

8

Residential Market Outlook

We have to make some assumptions in order to make aprediction about the uture o house prices in Calgary.First, we assume that rules around mortgage amortizationperiods will not change again. We are aware that the

ederal government has discussed lowering allowedamortization periods rom 35 years down to 30 years butthere hasnt been any discussion o this over the summerwhile the Bank o Canada has been busy raising the bank

rate, with a tepid impact on mortgage rates at majorbanks, in an attempt to prevent any housing bubbles

rom orming.

Our second assumption is that mortgage rates will risegradually throughout the next 10 years.

Tirdly, we have incorporated the energy and populationorecasts rom our soon to be published quarterly orecast into this Calgary house price outlook. Finally,

we presume that personal income will rise at close to the

same pace as in ation over the next 10 years.

Should this materialize our models indicate that averagehouse prices in Calgary can be expected to increasecontinuously but modestly over the next 10 years,maintaining value against in ation.

We nd no evidence that there is a bubble in the Calgary residential real estate market. We would comment thatlittle bits o oam might exist among certain marketsegments in Calgary, however, our models indicate that

the average price o housing would not be materially impacted over the course o a year by random poppingo oam, i any oam exists.

Bubbles

I people want something or no other reason thaneveryone else wants it then the price can be driven up,

sometimes dramatically so. (eg. Dutch ulip mania o 1637) A price bubble orms when such demand drivesthe price higher than would be i people only consideredwhat the product is actually use ul or. Bubbles growwhen investors see the price rising and decide they canmake some pro t by just holding the product. Te pricerises and rises and eventually gets so high that peopleeither re use to pay the price or they just do not haveenough money. Demand stops growing, and prices stopgoing up. At this point investors usually decide to cash-in, and they ood the market causing the price to allabruptly. Seeing prices start to all, would-be buyersdecide to wait to see i they can get a better price. Demand

disappears completely while supply is abundant and theprice crashes, the bubble bursts.


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September 201

Briefng Note

Commercial Market

Te Calgary o ce market seems to grow in spurts.Undoubtedly the largest o ce construction spurtoccurred in 1979-1983 when almost 24 million square

eet o o ce space was completed. About hal o thecurrently existing o ce space in Calgary was builtin those short our years. Other growth spurts havehappened since then but none o them have comeanywhere near matching the magnitude o those ouryears when a city o tall skyscrapers cropped up like cornon the prairies.

Other growth spurts have coincided with employmentgrowth. 1988 to 1992 saw about 4.3 million square

eet built (9% o current market) then the market took a pause until 2000. 2000-2001 added 3 million square

eet and 2007-2010 saw about 9 million square eet (18%o current market) completed with about another 4.5million square eet to be nished by the end o 2012.5

During these periods total employment grew in step,neither leading nor lagging behind the increase in o cespace. It would seem that since the rst boom, o cespace has been provided on a Just in ime basis inCalgary.

5 Avison Young Calgary O ce Market Report, Second Quarter2010

City o Ca gary: Tota O ice Space an Employment (1987 2009)

80048


Total Office Space

millions of square feet thousands of persons

700

800

45

48

a c e


Total Office SpaceTotal Employment


600

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f f i c e S p a c e




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T o t a l O f f i c e S p a c e




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Canadian municipalities are concerned about thehealth o their o ce markets or many reasons. Ahealthy o ce market indicates good opportunities orlocal municipalities to compete in the global economy.Secondly, municipalities are concerned as a signi cantportion o their revenue comes rom the o ce market.In Calgary about 14% o total municipal revenues come

rom each o residential and commercial propertytaxes. In addition, Calgary has a kind o businessoccupancy tax, as it has been known in other Canadianmunicipalities 6. About 6% o municipal revenues are

derived rom what is known locally as a business tax7.

6 Several Canadian municipalities have opted to abolish thistype o tax and roll the taxes into the commercial propertytax system. Tis has required the introduction o multiplecommercial property tax rates and essentially orced landlordsto be the tax collectors or municipalities wishing to tax businessoccupants.

7 City o Calgary Annual Report 2009


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September 2010

Briefng Note

10

common hallways) the space per employee has droppedto the current level o 62.6 square eet. Tat is roughly theequivalent o a 2 m x 2 m square work area with barely enough room or common hallways. Te standard is sotight that but or cubicle walls, most downtown Calgary o ce workers could lean over and touch each otherwithout having to move their chairs.

Tere are several reasons or this type o o ceenvironment It minimizes environmental control

cost, minimizes oor space rental cost per employee,minimizes construction and maintenance costs and, ormost workers, has minimal impact upon their actualoutput. Our statistical modeling indicates that things arenot going to change much or sandwiched employees.With current o ce urniture sizes it appears that theminimum employee con guration is 59 square eetper employee while current trends indicate the averageCalgary o ce will reach that density within 3 years.Afer that, urther oor space optimizations will requirenew investment in urniture that has a smaller ootprint.

Demand for Of ce SpaceO ce vacancies are expected to rise with the completiono several o ce towers over the next couple o years.Currently we are expecting the average vacancy rate to jump rom just over 9% to about 16% then to slowly diminish over the next 8 years to about 8%. Even withthe relatively high vacancy rates we anticipate thatdowntown workers will continue to work in cubicles as

businesses attempt to sublet any space that they deemmight be surplus to their actual or anticipated utureneeds.

The Cubing of Calgary:

Average Office Space per Employee in Calgary (1987 2008)

110


square feet

90

100

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square feet

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square feet

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square feet

Another trend which should be noticed is that averageo ce space or each employee has been decreasing since1987 in Calgary. In 1987, the average space or every employee was over 97 square eet, while in 2008 thisnumber dropped to less than 63 square eet.

Te speed o growth in o ce space was slower than thato employment, especially in the past a ew years. Tiscould partly be explained by the increasing proportiono jobs in construction, mining sectors, and trade, which

require less o ce space than average.Since 1987 the average o ce space per employee in thedowntown core has been dropping. From almost 100square eet per employee (about a 7 x 9 o ce space with


11/14

September 201

Briefng Note

1

f Employment is the key driver o o ce space demandin Calgary, net o the cubicilization e ect as the

ollowing diagram shows.

Calgary Office Space and Employment

48

50

Calgary Office Space and Employmentmillions of square feet

44

46

48

50

a c e


40

42

44

46

48

50

O f f i c e

S p a c e


34

36

38

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50

T o t a l O f f i c e

S p a c e


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Total Employmentthousands of persons


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S p a c e

Total Employmentthousands of persons


f Current o ce market expectations are or projectsthat are currently under active construction, likeTe Bow, to be completed by the end o 2012. Tiswill result in a total market supply in 2012 o about54.5 million square eet while the market demandis expected to be just over 50 million square eetyielding an overall market vacancy rate o 8% at theend o 20128.

f At the start o the 1980s o ce vacancy rates soared

with additions o more than 24 million square eet o

8 Other market observers are expecting a vacancy rate o around 15% by 2015, with respect we disagree. We anticipate atightening o ce space market as employment increases over the

orecast horizon.

inventory. Our current expectations are or vacancyrates to rise but or demand to rise as well so thatat the end o 2012 the market should experiencebalanced conditions, given that this marketgenerally operates with vacancy rates o around8-10%. Tough there will be a short term run up in vacancies it will not be too long be ore the vacancrate dips and more space is required, prompting therestarting o currently capped projects.

f Our models indicate that an additional 1 millionsquare eet o downtown o ce space should beneeded between the end o 2012 and the end o2015 to meet demand. Further an additional 6million square eet should be needed by the end o2020 just to maintain an overall and relatively low vacancy rate o 6%.

Additionally, be ore 2020 Calgary may see its rst majoskyscraper demolition and corresponding replacement.Slightly less than hal o Calgarys current o c

inventory will be about 40 years old by 2020. About20% will be even older. A recent study o demolitionbetween 2000 and 2003 in Minneapolis/St. Paul revealedsome surprising acts regarding the longevity o steeand concrete structures in northern climates.

O the concrete buildings that were demolished inMinneapolis/St.Paul between 3000 and 2003, only 1/3were at least 50 years old, well short o their expecteservice li e o 87.2 years. O steel buildings, 80%demolitions occurred be ore their 50 year mark, well

be ore their expected retirement at 77.3 years.

Te reasons or the Minneapolis demolitions had little todo with the expected service li e o the buildings but rathehad everything to do with their use ul li e given thei


12/14

September 2010

Briefng Note

12

design and upkeep. Reasons or demolition were relatedto plans to redevelop an area (35%), lack o suitability

or current needs (22%) and lack o maintenance in non-structural elements (24%). Less than 4% o the buildingstaken down in Minneapolis over 2000-2003 were retiredbecause they had reached their designed service li e andwere su ering structural problems. 9

Conclusion

Residential Market Te outlook is or slowly rising average prices over thenext 10 years, keeping up with in ation.

Tere is no indication that a housing bubble has ormedin Calgary. Some market segments might see someprices adjust downward over the next little while but thisis an indication o normal market operations and doesnot a ect our outlook o rising average prices.

Demand in the condo market is down compared to aew years ago. We anticipate reduced condo market sales

activity will be the norm or the next 10 years.

Calgary house prices are responsive to:

f public policy rules,f immigration,f employment,f income and mortgage rates, andf construction costs including planning and building

code compliance costs.

9 Survey on actual service lives or North American buildings,October 2004, Jenni er OConnor, Forintek Canada Corp.Vancouver B.C.

Changes in the outlook o these items will alter theoutlook or Calgary house prices.

Of ce Market:Employment drives the demand or new o ce space inCalgary. Te recent downturn in employment has putthe brakes on o ce development in Calgary.

Over the next 5 years the Calgary o ce market shouldbe well served by existing structures and projects that arecurrently under active development.

By 2020 we anticipate that increased employment willdrive a need or an additional 6 million square eet o o ce space in Calgary. Tis takes into account possiblee ciencies in making o ce work spaces even smallerthan they currently are.

It is likely that be ore 2020 Calgary will see some o ceredevelopment activity occur with at least one olderdowntown tower being demolished and rebuilt.


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September 201

Briefng Note

1


14/14

Who We Are

Over the past ten years Corporate Economics has researcheddozens o economic topics and developed reliable methodso orecasting and analysis. Monitoring economic trendsallows us to develop unique insights on how externalevents are impacting the local economy and the MunicipalCorporation. We provide services in our areas: orecasting,in ormation provision, consulting and policy analysis.

Briefng Note - September 2010

Many o our publications are available on the internet at www.calgary.ca/economy.

M o n t h

l y

E n e r g y

M a r

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E c o n o m y

C o m m e n t a r y

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B r i e n g

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l y

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i c T r e n

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Q u a r t e r l y

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s Q u a r

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ENERGY MARKETS ANDTHE ECONOMYCorporate Economics January 2010

Labour Market Review February 5,2010Patrick Walters,City Economist | IvyZhang,Corporate Economist

calgary.ca/economy call 3-1-1

P.O.Box 2100,Stn.M,#8311,Calgary, AB,Canada T2P 2M5 | Email:[email protected] | Tel:403.268.2005

CalgaryEconomicRegion

JANUARY

2010

Jobcreations in the goods-producingsector laggedthose in the servicesectoracrossCanadain January 2010. Accordingto the seasonally adjusteddata, from December2009 to January 2010:

Totalemployment decreased by1,800 intheCalgaryEconomicRegion(CER)and 7,300in Alberta, compared toanincreaseof43,000in Canada.

InCanada, newjobsweremostlycreated inpart-time(+41,500)withgainsin theservicesector (+66,100)partially o set bylossesin thegoods-producingsector(-23,100). InAlberta, jobdisappeared mainlyinthegoods-producing sector(-7,600), and totalemployment losses in part-timejobs(-13,900) werepartlyo set by gainsin full-timejobs(+6,300).

From the startof recentdownturn, jobsin the CERdisappeared rstinthe goods-producingsectorandthen in the service sector. While jobcutscontinuedin the goodss ectorin recentmonths, totalemploymenti nthe service sectorhas since recoveredits losses andreached the highest seasonal levelso n record(See Chart1) . Accordingto the unadjusted 3-month-moving-average data, the followingyear-over-yearchangeswererecordedin the CERin January 2010:

Totalemployment dropped by22,200 positionsin theCER, with 25,600lossesingoods-producin gsectorand 3,400 gains intheservice sector. eunemployment rateincreased to7.3 percent, from4.1 percent last year.

Chart1.Calgary(CER):Employment changebysector (Year-over-yearchanges, thousandsof persons)

J a n -

0 6

J u l - 0 6

J a n -

0 7

J u l - 0 7

J a n -

0 8

J u l - 0 8

J a n -

0 9

J u l - 0 9

J a n -

1 0

E m p

l o y m e n

t c

h a n g e s

( 0 0 0 s )

-40

-20

0

20

40

60

80Goods-producing sector Service-producing sector Allindustries

Source:StatisticsCanada; CorporateEconomics,February2010

Chart2.Calg ary(CER):Unemploymentratebyagecohort(January2009 vs. January2010, percent )

15-1920-2425-2930-3435-3940-4445-4950-5455-59 60-64

P e r c e n

t

0

2

4

6

8

10

12

14

16

18

20Jan2009Jan2010

January2009average

January2010average

Source:StatisticsCanada;CorporateEconomics,February2010

Averagewagein ationintheCMAwas 0.8percent, compared to3.2percent ayearago.

Current unemployment ratesinsomeage-cohortsweremuch higherthantheregion alaverage(7.3 percent), dueto cutsin certainindustriesand morepeopleseekingemployment (SeeChart 2). Forexample,youngpeople (age15-24) with lesswork experienceand skills typically workintheretailand constructionindustrieswherejobsdisappearedquicklyduring downturns. eun employment rateswere evenhigherforthemtoday (18.6percent for age15-19 and 9.8 percent forage 20-24)thanayearago(9.7 percent forage15-19 and 7.4 percent forage20-24). Forpeoplein age60-64 cohort, although the totalemploymentdidnt change, thefact that moreofthem werelooking forjobs resultedintheunemployment rateforthisgroup jumpingfromzeroayearagoto11.3percent today. Moreelderworkerslookingforjobsmaybeexplained bythead ded workere ect, wherea memberofthe householdloseshisor herjoban d anothermemberentersthe workforceinorder tosupplement thefamilyincome.

InNovember, 18,680Calgariansreceived regular employment insurancebene ts, a303 per cent increaseovera year.

Next update: March 12, 2010

Calgary lagged behind in job creations

LabourForce StatisticsEconomicRegions (Unadjusted 3-Month-Moving-Average)

R e g i o n

D e sc r ip t io n J a n- 1 0 D e c- 0 9 J a n- 0 9 AnnualChange

C a l g a r y

Wo r k i ng A g e P o p u l at i o n ( ' 0 0 0) 1 , 0 63 . 7 1 , 0 61 . 8 1 , 0 33 . 1 3 0 . 6

L a bo u r F o rc e ( ' 00 0 ) 7 9 8. 1 8 0 1. 4 7 9 5. 2 2 . 9

Labour Force Participation Rate (%) 75.0 75.5 77.0 (2.0)

E m pl o ym e nt ( ' 00 0 ) 7 4 0. 1 74 4 .5 7 62 . 3 ( 2 2. 2 )

E m pl o ym e nt R a te ( % ) 6 9 .6 7 0 .1 7 3 .8 ( 4 .2 )

U n em p lo y me n t ( '0 0 0) 5 7 .9 57 . 0 3 3 .0 24 . 9

U n em p lo y me n t Ra t e ( % ) 7 . 3 7 . 1 4 . 1 3 . 2

E d m o n t o n

Wo r k i ng A g e P o p u l at i o n ( ' 0 0 0) 9 5 0 .2 9 4 8 .8 9 2 6 .4 2 3 . 8

L a bo u r F o rc e ( ' 00 0 ) 6 8 6. 9 6 8 6. 7 6 6 9. 7 1 7 .2

Labour Force Participation Rate (%) 72.3 72.4 72.3 0.0

E m pl o ym e nt ( ' 00 0 ) 6 4 1. 0 6 3 7. 0 6 4 1. 6 ( 0 .6 )

E m pl o ym e nt R a te ( % ) 6 7 .5 6 7 .1 6 9 .3 ( 1 .8 )

U n em p lo y me n t ( '0 0 0) 4 5 .9 49 . 7 2 8 .1 17 . 8


A l b e r t a

Wo r k i ng A g e P o p u l at i o n ( ' 0 0 0) 2 , 8 95 . 4 2 , 8 91 . 3 2 , 8 23 . 9 7 1 . 5

L a bo u r F o rc e ( ' 00 0 ) 2 , 12 0 .8 2 , 12 4 .8 2 , 09 7 .7 2 3 .1

Labour Force Participation Rate (%) 73.2 73.5 74.3 (1.1)

E m pl o ym e nt ( ' 00 0 ) 1 , 97 7 .3 1 , 9 79 . 0 2 ,0 1 0. 1 ( 3 2 .8 )

E m pl o ym e nt R a te ( % ) 6 8 .3 6 8 .4 7 1 .2 ( 2 .9 )

U n em p lo y me n t ( '0 0 0) 1 4 3. 6 1 4 5. 7 87 . 5 56 . 1


StatisticsCanada:CANSIM,Table ID:282-0054Source:Corporate Economics,StatisticsCanada,February 2010

.O. Box 2100, Stn. M, #8311, Calgary, AB, Canada T2P 2M5

For more in ormation, please contact:

Clyde Pawluk , Senior Corporate [email protected]

Wendy Fan , Corporate Economist403.268.8690wenhui. [email protected]

Corporate Research Analyst: Estella Scruggs

briefing_note_6_calgary_real_estate

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