Feature Article
THE CHALLENGES OF RAPID GROWTH
Written By: Lawrence Herzog
Published By: Real Estate Weekly
Article © Copyright Lawrence Herzog
2006-11-23
; "The challenges of rapid growth")
Alberta is in the midst of the strongest period of economic growth ever recorded by any province in Canadian history, says Statistics Canada. Greater than the Hong Kong driven B.C. boom of the late 1980s and early 1990s, more vigorous than the Ontario glory years in the 1960s, bigger even than any of the Alberta booms of the 20th century.
"The Alberta Economic Juggernaut: The boom on the rose," released by StatsCan in September, reports that Alberta's total Gross Domestic Product (GDP) surged 43 per cent between 2002 and 2005, and shows no signs of slowing. In the last four years, Alberta's GDP, which tallies the total value of goods and services produced in the province, has grown by an average rate of nearly 13 per cent. That puts Alberta in the same league as China, the world's fastest growing major economy.
As a result of this unprecedented boom, Alberta has the highest share of its population employed and the lowest unemployment rate of any province or state in North America.
The report pegged Albertans" average annual income at $66,275, double what it was ten years ago, and 56 per cent above the national average. Not surprisingly, Alberta leads the country in hourly wage rates, with an average of $20.94.
All that income is driving spending, and Alberta consumers spend more than any other Canadians. That's pushing retail sales, which are about 17 per cent ahead of where they were least year, clearing the way for the best sales year of any province ever in Canadian history.
The boom is being felt significantly in Edmonton, and in the first ten months of this year, more than 25,000 new jobs were created. Employment is pushing the demand for real estate and the Edmonton Real Estate Board reports prices continue to increase.
The average residential selling price for houses and condominiums reached $278,732 in September, a rise of 46.3 per cent from September 2005. Single family dwellings sold for an average of $322,077, up significantly from $216,490 in September 2005.
StatsCan says housing demand in Alberta increased 17 per cent last year, partly because more people moved from other provinces. Housing starts in the province have now surpassed Quebec, despite La Belle Province having more than double Alberta's population.
No wonder that the city's new general manager of growth is warning that the Edmonton region could face a crisis similar to that now confronting Fort McMurray if it doesn"t act, and act now. "We are starting to feel the consequences of current growth," Janet Riopel warns.
The lack of affordable housing and transportation problems are just two of the areas of concern she cites, warning that strained social services and gridlock will ensue unless plans to expand services and infrastructure move ahead prudently. Regional co-operation between the 23 municipalities in the capital region to share costs and benefits is crucial to deal with the stresses and challenges that phenomenal growth will bring, she says.
The pace of growth appears poised to accelerate, with $40 billion worth of oil sands upgraders in Sturgeon County in the works. The upgraders along with continued expansion around Fort McMurray and in the oilfield, industrial, service and manufacturing sectors mean the prospects are good for continued growth, and continued shortages of labour.
The city estimates 83,000 newcomers will flood into Edmonton over the next five years. That will only exacerbate transportation bottlenecks.
With city streets and freeways jammed with cars and bus and LRT ridership at record levels, city council recently allocated $1.6-billion for construction over the next five years, but admitted it isn"t as much as the city needs. Streets are already "busting at the seams," conceded Mayor Stephen Mandel. "It takes an hour to get home sometimes."
The cost of construction projects continues to go up, by 20 per cent over the last year, and those increases have gobbled up the city funds available to build and repair roads and overpasses and buy much needed new buses. That means many construction projects will be delayed, including repairs to streets and sidewalks and a proposed Bus Rapid Transit (BRT) line from the west end to downtown.
The StatsCan report also notes that, while the boom has brought unbridled prosperity to Alberta, some worrisome long-term effects have emerged. These include some of the highest rates of high school drop-outs in the country. In rural Alberta, one out of four young people are quitting school, presumably spurred by the promise of attractive pay for relatively unskilled work. However, as the report notes, these youths will be ill-prepared to deal with the consequences of a slowdown in growth.
One lesson has history has taught is that, at sure as night follows day, boom will go bust. Yet if the indicators are correct, it won"t happen anytime soon.
