NEP and Recession (1982-1990)
Over the past several decades, real estate development in Alberta has often been closely linked to the oil industry. Alberta's real estate industry enjoyed great prosperity when oil was discovered near Leduc in 1947. This link was even more evident when the price of oil skyrocketed during the OPEC crisis of 1973, greatly enriching the province and its real estate industry. With such an intricate relationship, hardships can also occur. For instance, in 1982 when the oil industry suffered economic setbacks, so too did the real estate industry.
Prior to this crisis, the Government of Canada, wanting its share of Alberta's oil profits, introduced the National Energy Program (NEP) in 1980. The program sought to regulate oil prices below market value, raise corporate taxes, and redirect development of the oil industry into the Northwest Territories. After the institution of the NEP, accompanied by a strong hike in interest rates, many oil companies moved out of Alberta.
Many industries in Alberta suffered from the policies implemented by the NEP, and the real estate industry was one of the hardest hit. Owners and businesses alike were selling their property and relocating outside of Alberta. Real estate firms, even well established ones, went out of business. Mortgage companies collapsed when home owners began defaulting on their mortgages. By the end of 1981, a recession was evident across the province and Alberta would not fully recover until the late 1980s.
The effects of the NEP and the recession hit Edmonton far worse than Calgary. After recording record years in issuing building permits during 1980 and 1981, development in the city ground to a near halt in 1982 thus causing real estate prices to plunge. As the capital city, Edmonton's economy was affected by government downsizing, cutting a number of jobs in the public service sector. Plunging oil prices in 1986 eliminated more jobs and by 1987, Edmonton had the highest unemployment rate in the province, a staggering 11.1%. Almost 24,000 Edmontonians were on welfare with many having to rely on the Food Bank.
One of the few significant real estate developments in the early 1980s was the building of West Edmonton Mall, at the time, the world's largest mall. Phase 1 was completed in 1981. The mall has been expanded three times since its opening in 1981, with additions completed in 1983 (Phase II), 1985 (Phase III) and 1999 (Phase IV). Phase II and III were completed during the height of Alberta's recession opening up a number of employment opportunities in the labour and retail sector. Evidently, retail was one of the cornerstones of Edmonton's economy during this turbulent time.
Calgary weathered the affects of the recession reasonably well. Although numerous oil and gas firms left the city Calgary remained home to 57 of Canada's most profitable companies. While many managers and executives were laid off, the oil industry pushed forward, albeit with lower productivity. Despite unemployment rates rising to 9.6% in 1986, the real estate industry began a moderate recovery in 1987 when new real estate projects were developed. Downtown office space was snapped up, as new businesses moved in to take advantage of Calgary's well-designed roads, speedy C-train (Light Rail Transit), and efficient international airport. The housing market posted gains of 11% in that year, while unemployment rates dropped. The Winter Olympic Games of 1988 were hosted by the city and created not only a strong sense of civic pride but also economic prosperity and employment opportunity. The legacy of Canada Olympic Park is evident even today; the complex features a hall of fame exhibit and numerous world-class training facilities. Construction continued through the mid and late-1980s as a new Eaton's Centre, Bankers' Hall, Canterra Tower, Cascade Tower, and Amoco Tower reshaped the downtown skyline.
Rising oil prices, combined with improved technology in the oil and gas sector, allowed Alberta's urban centres to recover by the late 1980s and early 1990s. Affordable housing prices, falling interest rates, and demand for housing due to continued urbanization, created ideal conditions for the real estate industry. In Edmonton, new projects were in the works such as the Eaton's Centre, a convention centre, Alberta College, the Winspear Centre and a new city hall. Each building signified the return of prosperity to Alberta's capital city. By 1992, the real estate industry was once again setting sales records.Bibliography
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Goyette, Linda and Carolina Jakeway Roemmich. Edmonton in Our Own Words. Edmonton: University of Alberta Press, 2004.
Jenish, D'Arcy. "Depressed Oil Prices and the NEP Devastate the Alberta Economy." Alberta in the 20th Century, Vol. 11: Lougheed & the War with Ottawa. Edmonton: United Western Communications Ltd., 1991.
Koch, George. "Greed, Neglect and the NEP Wreck Alberta's 'House of Cards'." Alberta in the 20th Century, Vol. 11: Lougheed & the War with Ottawa. Edmonton: United Western Communications Ltd., 1991.
Nemeth, Tammy. "1980, Duel of the Decade." Michael Payne, Donald Wetherell, and Catherine Cavanaugh (eds). Alberta Formed, Alberta Transformed. Edmonton: Alberta 2005 Centennial History Society.