Blood in the oil sands: Boom and bust in Alberta
In Fort McMurray, the city of 76,000 at the centre of Canada’s biggest oil fields, housing sales plunged 66% in February and are down 30% through the first two months of this year, the local real estate board reports. Only 48 houses sold last month and the rental vacancy rate has spiked to 12%, the highest in Alberta.
Further south in Cold Lake, the centre of in-situ oil production, total building permits plunged to $1.7 million, down from $8.9 million in the first two months of 2014. New housing starts have collapsed. Only two new single-family permits were issued since January, compared to 20 in the same period a year earlier
“Stores are less busy and streets have quite a bit less traffic,” said commercial realtor Ken Shebib who has lived and worked in Fort McMurray for 38 years “A number of my [retail] clients report that sales are down considerably as compared to last year.”
But there is also stubborn confidence.
“The general consensus from companies seems to be to hold steady and keep moving forward,” said the senior associate with Cushman & Wakefield.
The average composite home price in Fort McMurray remains near $597,600 – the highest in Alberta – but may not hold. “This may change if sales continue to slow,” said Canada Mortgage and Housing Corp. analyst Braden Batch.
However, there is no consensus and little confidence on the direction of oil prices. Western Canadian Select, the benchmark for the Alberta oilsands. was trading at US$36.02 per barrel as of press time – the lowest priced oil in the world. A survey of resource analysts by commercial agency Avison Young showed gyrating forecasts, from lows of $50 per barrel to highs of $130 per barrel by 2017, hardly confidence inspiring.
The agency warns lower oil will definitely drag down Alberta’s commercial market. “If oil prices continue to decline, demand will largely be absent from the market.”
Craig Copeland, mayor of Cold Lake since 2007, is nonplussed by the current real estate slump.
“Some of the speculative builders are hunkering down,” he said, but voiced confidence that oil prices – and construction – will recover. “They always have.”