The Recession of 1982

Responsible Enterprise: A History of Edmonton Real Estate & the Edmonton Real Estate Board



Introduction

Chapter One - Real Estate and the Birth of Edmonton 1870-1899

Chapter Two - Real Estate and the Railway Boom 1900-1913

Chapter Three - War and Depression 1914-1939

Chapter Four - War and Economic Expansion 1940-1950

Chapter Five - A Golden Age for Edmonton Real Estate 1951-1981

Chapter Six - Continuity and Change 1982-1995

Conclusion and Appendices

By John F. Gilpin
Copyright © 1997 Edmonton Real Estate Board
Published with the support of the Alberta Real Estate Foundation
105 pages - Over 120 sepia photos, foreword, acknowledgments, introduction, six chapters, a conclusion, several appendices, and property profiles.
8 1/2" x 11 1/4", out of print, ISBN 0-9682695-0-8

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The recession of 1982 was begun by the national energy policy. It had the effect of directing investment away from the development of Alberta's petroleum resources and towards the frontier regions and Newfoundland. It led to the cancellation of projects designed to develop the oil sands.

Another more long-term factor affecting the Edmonton economy was demographic. The baby boom generation, born between 1946 and 1964, created an unprecedented demand for housing which was not continued into the 1980s and 1990s.

The result of the economic slowdown on the labour force in Edmonton was dramatic. Between 1971 and 1981 employment increased by 165,150 jobs. Between 1981 and 1990 the labour force in the Edmonton metropolitan area increased by only 5,000 jobs. Employment levels in goods-producing industries in 1992 were below their 1981 levels. The largest declines were in construction and manufacturing. Employment growth was concentrated in the service-producing industries.

The impact of the 1982 recession on the Edmonton real estate market was reflected in comments to the press by Art Jones, the then public relations manager for the Edmonton Real Estate Board. In 1983 an article entitled "Grim year for realtors as local ranks dwindle," appeared in the Edmonton Journal. While many Canadians were worrying about how wage restraints would affect their lives, the article noted, some Edmontonians were trying to cope with much more stringent constraints. Incomes of the average real estate salesperson dropped by one-third in 1982 because of plummeting sales. In January 1983 Edmonton had 1,820 licensed salespersons, down from 2,388 from a year earlier.

The ranks of the agents were also pared from 353 to 297 because of mergers, closings, and business failures. Low overheads kept small firms in business, while large firms gained strength from economies of scale. Most of the casualties were medium-sized firms. A number of well-established firms went out of business. These included Buxton Real Estate, Weber Brothers, and Graham Real Estate. Two of the exceptions were Spencer Real Estate and Molstad Real Estate.

Despite the situation, Art Jones was still optimistic. In his view, it was a good time to buy a home since interest rates had fallen sharply, there was a good selection of homes on the market, and prices were as good as they were ever going to be. This was especially true of $200,000-plus homes, which had dropped in price by as much as 25 percent.

The negative impact of the recession on the resale housing industry sent the average selling price from $91.405 at the end of 1982 to $74,175 by the end of 1985.

The recession also had a significant impact on land developers. Before the recession, they had amassed large land inventories financed at high rates to avoid a severe shortage of residential lots only a year earlier. Most large developers launched asset reduction programs to dispose of the land and raise cash for other obligations. As in 1913, land purchased on the outskirts of the city was no longer in demand. Murray Fox, vice-president of Carma Ltd., was quoted in the May 5, 1984, Edmonton Journal as saying that some of the property: "looks like it will be farmland for twenty years." The Nu-West Group Ltd. of Calgary, which sold $330 million in assets, lost $148 million on sales of $683 million in the nine-month period ending September 30, 1982. In the same period in 1981 it earned $12 million on sales of $663 million. Melcor, of Edmonton, also disposed of most of its undeveloped land, and Calgary based Atco got out of residential construction entirely.

This article is extracted from John Gilpin, Responsible Enterprise: A History of Edmonton Real Estate & the Edmonton Real Estate Board. (Edmonton: Edmonton Real Estate Board, 1997). The Heritage Community Foundation and the Alberta Real Estate Foundation would like to thank John Gilpin and the REALTORS® Association of Edmonton for permission to reproduce this material.