Pine Beetles likely to dent Alberta's Real Estate Prices
By: Mario Toneguzzi, Calgary Herald
CALGARY - The mountain pine beetle infestation is likely to affect real estate values in Alberta over the next decade, says a report released today by the Real Estate Investment Network.
“These tough economic times coupled with pine beetle aggression have lead to the closure, both permanent and indefinite, of over 13 mills across Alberta,” said Don Campbell, president of REIN and author of two bestselling books on real estate.
“And over the past 17 years, our research has revealed that real estate values are driven both up and down by eight economic fundamentals, of which industry change (job growth and job loss) is one of the most dramatic catalysts. The real estate market will suffer if there is no future job sustainability in an area.”
The REIN report says forestry is the primary or only industry in over 50 Alberta communities. From a real estate investment perspective the forest-based area of Alberta that may experience pine beetle related hardships fall into two categories.
Tier One includes Hinton, Edson, Grande Cache, Rocky Mountain House and Drayton Valley. The report says these areas must be watched closely.
“These areas have relatively small populations, some degree of pine reliance and are geographically located in areas more susceptible to beetle attack,” says the report. “If investing in these areas a risk premium is necessary - at least double the cash flow seen in other areas.”
Tier Two includes Grande Prairie, Whitecourt, Athabasca, Slave Lake, High Prairie and Cochrane.
“Out of these areas Cochrane will see the largest impact from pine mortality due to location, but other factors for the area should help shelter the region to a degree,” says the report. “Grande Prairie is currently getting hit on two fronts, low natural gas prices and tough forestry conditions - it may be a bumpy ride for investors, but the long-term outlook is still strong. Slave Lake, Athabasca, and High Prairie have small population bases and will be subject to market volatility from poor economic conditions, but the pine beetle overall should have limited impacts in these areas.”
REIN says it is important all investors be aware of small town volatility in general and with current forest economics as they stand most of the small forestry town mentioned will see “pressure on real estate markets both in price and vacancy rates.”