Pine Beetle Biting into Property Values
Investment adviser cautions against deals in forestry-reliant towns
Bill Mah, Edmonton Journal
Mountain pine beetles are doing more than ravaging Alberta forests: The invading pest is also likely to take a bite out of real estate values in some communities over the next decade, says a report released Monday by the Real Estate Investment Network.
"These tough economic times coupled with pine beetle aggression have led 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. REIN is a group that offers education to members on buying real estate.
Campbell said significant change to an industry is one of the most dramatic catalysts for real estate values. "The real estate market will suffer if there is no future job sustainability in an area."
REIN's report says forestry is the primary or only industry in over 50 Alberta communities.
From a real estate investment perspective, the report divides forest-industry communities into how much hardship they are likely to face.
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.
In Grande Prairie, which is coping with low natural gas prices and the struggling forestry industry, "it may be a bumpy ride for investors, but the long-term outlook is 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."
The report said larger centres such as Edmonton will not directly feel the effect of the pine beetle infestation due to the diversity of their economies.