Real Estate Investing in Alberta

Real Estate Investing in Alberta

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Investing in Canadian real estate requires a smart business plan, start-up capital or collateral and a good understanding of how each province’s real estate market differs from the rest. Knowing where the hot markets of today and the future make it easier for you to turn your simple investment into a profitable business.

Table of Contents - Real Estate Investing in Alberta

Alberta is the most populous of Canada’s prairie provinces, and the fourth most populous overall, home to the Canadian Rockies as well as prairies, forests and badlands. Major cities Edmonton and Calgary offer metropolitan entertainment, sporting events and dining, while the vast landscape and 500 natural preserves—including 75 provincial parks—offer plenty of activity for outdoorsy adventurers and nature lovers alike.

Alberta is dominated by the oil industry, agriculture and cattle ranching, the three major industries in the province, and its residents are some of the best paid in the country. Home prices in this province tend to be less expensive than hot markets like Metro Vancouver and Toronto, and there is plenty of room for growth even in the two largest cities. If investing during when prices are low and waiting for things to improve is in your business plan, this province offers many opportunities.

Is investing in Alberta real estate right for you? This overview will help you determine what to expect if you decide to make Alberta the next stop on your commercial real estate venture.

Alberta’s key features and demographics

Alberta has a population of over 4 million residents. It covers over 660,000 square kilometres and was officially established as a province in 1905. Alberta is on the western side of Canada, bordered by British Columbia to the west, Saskatchewan to the east and the United States state of Montana to the south. The region is home to most of Canada’s western oil fields, which is a thriving industry despite the fluctuating state of today’s oil industry.

Over the last two decades, Alberta’s population has been steadily growing, thanks to its equally growing economy it has one of the highest rates of growth within the country. As of the last census, it had the smallest rate of elderly residents (12 percent) and the largest share of children, who make up just over 19 percent of the total population. It’s one of the youngest provinces—the average age is just 36.7 years old. When you’re investing in Alberta real estate, it’s important to keep in mind that for the greatest success, you’ll need to target Millennials and Gen Z residents.

The average home price in Alberta is $376,000 in 2020, which has fallen over the past few years. Alberta has an oversupply of housing that far outweighs the demand, making it a good time to buy real estate if you can wait for the market to return to normal. Buying cheap now could be a good decision, as employment and housing rates are projected to go back up after the COVID-19 pandemic has passed. This may take years, however, so be aware that investing in Alberta is to play the long game.

The two major cities in Alberta are Calgary and Edmonton, the capital, whose metropolitan areas account for around 1.2 and 1.1 million people respectively. The 400 km “corridor” between these two cities is the most densely populated in the province, housing about 70 percent of the province’s population altogether.

Alberta’s median household income (for both individuals and families) is $72,700, making its residents some of the most well-paid in Canada. In fact, in 2015, the median income was almost 28% higher than the rest of the country. However, income has been declining over the past few years, so keep that in mind when you’re considering investing in Alberta real estate—this is probably not the province in which to invest in large luxury properties if you want to see profits right away.

A focus on oil fields, agriculture and cattle ranching

Up until recently, Alberta’s economy was one of the strongest in the world, at one point even exceeding the GDP of the United States. As of 2017, the GDP was $327.4 billion. These numbers have been falling over the past few years, but remain some of the highest in the nation.

The oil industry in Alberta is thriving; the province is the fourth-largest producer of natural gas and the second largest exporter in the world. In 2018 alone, it contributed $71.5 billion to Canada’s national GDP. Edmonton is home to quite a few refineries, which produce raw materials for the petrochemical industry, and the province (specifically Edmonton and Red Deer) product vinyl and polyethylene products that are shipped around the world.

Alberta is also home to oil sands near Fort McMurray, which are estimated to have oil reserves equal to those found around the rest of the world. Oil sands are more challenging to mine, so when oil prices are high, it is still a profitable endeavour. When they drop, as they have done in recent times, it’s less cost-effective—but the oil industry is still huge, and real estate near large oil production and mining areas have good potential. As of 2017, the energy industry provided about 7 percent of Alberta’s jobs.

Agriculture is another of Alberta’s major industries. Wheat, canola and other grains are the province’s largest crops, and beekeeping here is the highest concentration in the nation. Because some canola crops require bee pollination, it has become an interrelated industry. Similarly, forestry is a multi-billion-dollar industry within the province, harvesting tinder and other byproducts to send to the United States and China.

Cattle ranching rounds out Alberta’s major sources of revenue; Alberta beef is some of the finest in the world, and about three million cows are living in the province at any given time. They also produce plains buffalo (bison) for consumption and are one of the largest producers of bison meat in the world. Cattle and bison in Alberta are valued at over $3 billion—a hefty part of the economy as well as the culture.

In short, if you’re thinking of investing in Alberta real estate, think about the major industries, who need housing and then tailor your business plan accordingly. Since this is one of the “youngest” provinces in the nation, bear in mind that you need to buy properties with the 40-and-under crowd in mind

Edmonton real estate market at a glance

Edmonton is the capital city of Alberta and has a population of over 1 million in the city alone, along with a robust surrounding metropolitan area. Since 1982, Edmonton’s growth has exploded, in part due to its proximity to the oil sands and the diamond mines in the northern parts of Alberta. The city is home to renowned concert halls, theatres, museums and a large number of festivals each year. The Edmonton River Valley adds the largest stretch of urban parkland in North America, spanning a distance 22 times larger than Central Park in New York City. The University of Alberta is also located in Edmonton, which has a roster of about 40,000 students. Popular sports teams include the Edmonton Oilers, Eskimos and FC Edmonton.

The average rent in Edmonton as of 2020 was $1,114 (up by less than 1%), and unlike the rest of the province, the rental vacancy rate declined slightly despite good supply available. The average home price was about $350,000 in 2019, down from $374,000 the previous year. However, experts predict that the housing market will regain steam in the years to come, particularly due to Edmonton’s economic abundance.

The average Edmonton household income is $93,454, with an average personal income of $47,784. Families often earn upwards of $110,000, making this a city with some serious spending power.

A snapshot of the Calgary real estate market

Calgary is situated between the Bow River and the Elbow River in the south part of the province, about 80 km from the Rocky Mountains; this major city is the largest in Alberta and the third-largest municipality in Canada. It hosts nearly 1.3 million residents and has shown continuous growth in recent years. Calgary is located in a prairie-like area but is close enough to the Rockies to attract outdoor adventurers.

Calgary is also a major player in the Canadian oil and gas market, with relatively low unemployment and a strong job market to match. Corporations tend to be attracted to the city—it has the second-highest number of head corporations in Canada, just behind Toronto, and includes a significant technology sector, which is bound to explode shortly. Like Edmonton, it has a robust cultural aspect, including a renowned library system, arts districts and museums. Many films are shot in and around Calgary, making the film industry a stalwart within the metropolitan area. It’s also home to the Calgary Flames, who enjoy an interprovince rivalry with the Edmonton Oilers. Most notably, Calgary is seen as a “gateway” to the Rockies, making it a great place to invest in property for adventure seekers, skiers and snowboarders.

The average Calgary household income is $111,867, putting it ahead of Edmonton as far as spending power. The average rent in Calgary is $1262, which is on-trend with a slight decline over the past few years. About half of Calgary’s residents rent versus own, so this could be a good market to purchase a commercial rental property, depending on what kind of deal you’re able to secure. In 2019, the rental vacancy rate was just 2.2 percent, implying that the supply does not outweigh the demand. Meanwhile, the average housing price is $410,000, which is more expensive than Edmonton.

When you’re considering investing in Calgary real estate, consider the location as well as the general demographics; many well-paid professionals prefer to rent over own. It’s also a prime location for targeting weekend warriors and adrenaline junkies for vacation rentals, given its proximity to the Rockies and a robust cultural offering.

Summary

Overall, Alberta real estate—especially in or near the major cities—offers a lot of investment potential. You’ll need to take into account current market trends, the demographics and major industries, but a shrewd investor will be able to spot great opportunities. For the most part, buying real estate in Alberta may involve playing the long game, particularly during the COVID-19 pandemic. However, if you’re able to expend some capital and wait it out, Alberta has the potential for major growth over the next decade.

To network with other Albertan real estate investors, there are multiple meetup groups organized by the major city as well as “Central Alberta,” which are likely your best bets in the Alberta market. Vacation properties near the major recreational areas, such as the national or provincial parks, nature preserves and the Rockies may also prove to be lucrative investments. The smartest thing you can do when investing in Alberta real estate is to watch how their major industries are faring; as oil prices rise and the industry expands, you can expect to see increased jobs and migration into the province. When these industries decline, emigration is imminent.

Ultimately, Alberta is a semi-rural province with distinct hotbeds of activity. Being one of if not the highest-paid province in the country, the wealthiest buyers have plenty of money to spend on quality real estate, but while the rents are high, home prices tend to be relatively low for major metropolitan areas. This province is best if you need to get in on the ground floor and can afford to wait until the market returns, but when it’s at full-force, you can expect to see great profits.

Why Invest In The Alberta Real Estate Market


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Scott Dillingham

Scott Dillingham

I have been investing and lending to real estate investors for nearly 10 years now. After thousands of successful deals between flips, rent to owns, student properties and commercial assets I have developed a deep knowledge of real estate investments and have a passion of sharing this information with the world! If your looking for a lender who specializes in rental property financing you're going to want to connect with me at team@lendcity.ca.