Quote:
Originally Posted by Claeren
Which is completely predicated upon the long term viability of our energy industry. I think our exports will always have a place in the world but the world as a whole is rapidly moving away from the current paradigm where structural reliance on oil and gas drives prices. Think coal industry in the NE USA, 60 years ago you would have said I was crazy to think that the world would use anything else.
Calgary (Alberta) also has no true shortage of land. Japan, Sanfran and even Vancouver (etc) have some long term issues that put a bottom in their markets completely unlike Calgary. You could double Calgary's population without moving outward at all. The only bottom in Calgary's market is the cost of materials to build new units.
If the Calgary market actually had demand for it, new builders could provide 20,000-30,000 units per year overnight. I am not sure how that is conducive to any upside. This discussion doesn't have to be about market downside -- with rents so far below carrying costs it is better to rent than buy unless there is upside.
Claeren.
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I disagree.
Working for a Land Development company for two years taught me the real costs of development. Infrastructure isn't cheap, and if you think the city builds roads, sanitary and storm sewers, electrical cables, then you are sadly mistaken. These are developer responsibilities.
The farther out you go from the core, the more expensive these utilities cost.
The cost of land acquisition alone is astronimcal, as speculators have bought up parcels and acerages and driven up the price of raw land.
Developers make a handsome profit, so do homebuilders as it stands now. But if you think their profit margins are anything over 20%, you are probably wrong. Tradesman and the cost of materials have already adjusted their prices to reflect the recession and a further drop in the cost of these components is unlikely.
Couple that with the city of calgary proposed levy of $10,000 per new house built and you have a fairly high cost to build.
Therefore, new housing and new housing prices can't go down much further, and if the market doesnt support bringing on new developments or projects, developers will mothball new phases/developments and sit and wait until it comes back.
As for your comment about builders having the capacity to build 20,000 - 30,000 units per night (should there be demand).....I hope you are kidding.
There is a process developers have to follow in terms of getting subdivision approval, development approval, servicing agreements etc.
It takes over a year in some cases to bring on a new phase, more if its a new development altogether.