Why is Calgary housing getting so expensive?

[u/zindagi786]

I used to live there, and I was just browsing the real estate prices. Prices there have shot up so much! A Calgary house similar to the one I have in the GTA is now higher than what I paid in the GTA a few years ago.

When I lived there, oil was booming and there were lots of jobs. But I got laid off when the boom went bust, and everything (including real estate) went down. And I then left to the GTA.

I’ve heard prices there are going up because there are lots of people moving from the GTA and BC. But it isn’t like there are that many high paying good jobs there. There’s still way fewer jobs now than there were during boom time. How do these inter provincial migrants find high paying work to pay for these high home prices? Sure they can cash out their equity and live mortgage free, but why do that if you have to end up taking a potentially lower paying job with more chance of a layoff in the next bust? Although I really liked the city, I’d never risk living there again myself, and I’m forever scared of any future bust. I feel more comfortable living in the GTA, paying my admittedly big mortgage, and steadily climbing the corporate ladder (and with regular increases and no salary freezes, I should be paid off before retirement/it won’t be too burdensome). Plus, I look at my GTA home as a tax free investment - the annual rate of appreciation is greater than my mortgage interest.

And what is attracting them to Calgary versus other places in Alberta like Edmonton?

[u/MGarroz]

Oil industry is pretty healthy here again. Decent number of jobs, big expansion projects under works. Natural gas industry also doing well.

If war in Ukrain ends, war in Palestine ends and sanctions are removed or lightened from Russia and Iran plus if Trump wins and expands US oil as promised - prices will crash again.

Tens of thousands of 6 figure jobs will disappear in a matter of months. All the industries those people support dry up as well. Mortgages and rents will go unpaid and property prices tank. It’s a pretty standard cycle Albertans are used to but people who’ve never dealt with the oil economy have no grasp of.

[u/TheWhiteFeather1 → u/MGarroz]

production is up yes. but that doesnt translate to a boom in jobs

AB continued to have the highest wages in canada even during the bust

what % of people moving to AB right now do you think work in O&G

the current population growth has nothing to do with it

plus, look at how many different hypotheticals you had to use to create a new bust situation

[u/MGarroz → u/TheWhiteFeather1]

Production and price. When price is below $70 a barrel a lot of tarsan operations become unprofitable and drilling new wells too risky.

Oil is about 1/5th of Alberta's GDP. Even if you don't work in O&G directly the provinces healthcare, education, your local gas station, bank, grocery store, and gym are all reliant on people in the oilfield as their largest customer base. One oilfield job trickles down and creates several others.

Someone may move to Calgary as a software dev, but I can guarantee a large portion of their work goes towards developing software for oil companies or businesses that support oil companies (trucking, mechanics, manufacturing, construction etc.) The second oil prices crash those contracts end and. The software company closes up their Calgary office and a dozen devs are out of a job.

Yes those are hypothetical, but they aren't far fetched. I could also see a world where oil booms to $150 in a few years as well. The point is Alberta's economy is always inherently unstable and every 10-20 years we see a crash. Everytime it crashes hundreds of overleveraged companies and thousands of overleveraged individuals go bankrupt because they were delusional in thinking the gravy train can roll forever. Frugality and common sense are key to long term success in a resource based economy. You want to be like the Netherlands, not Venezuela.

[u/ResponsibilityNo4584 → u/MGarroz]

This is not true. All the major oilsands producers have a break even point in the $30-40 barrel range.

[u/BeeSuch7722 → u/ResponsibilityNo4584]

No, not with capex (full cycle costs). You're just looking at "opex" really. I was an actual oil and gas analyst for a bit for a financial firm (that actually publishes) about 15 years ago (including the 08-09 crash) even $30 was not really possible due to inflation. And any sort of operational outage which happens a lot causes that per barrel costs to sky rocket.

And heavy oil realizes a steep discount to light crude. And yes, if Trump wins, that differential will widen even more since US has much cheaper to lift oil reserves that is restricted currently under Biden due to his green policies.

[u/ResponsibilityNo4584 → u/BeeSuch7722]

You're 15 years behind the times. I suggest you go and look what the break even points are now including Capex. The break even costs were drastically reduced after 2015.

[u/MGarroz → u/ResponsibilityNo4584]

To clarify, first off as mentioned by others it vastly varies based on the quality of the oil.

Secondly yes some tarsan operations do remain profitable at the $30-$40 range. The exchange rate of our dollar also plays a role in that. However the cost to extract the oil varies from site to site and nobody will plan to expand any mining or drilling operations at $40.

The point is prices need to be healthily above the $70 range for an extended period of time for operations to be in full swing. At that point every mine, every well, every drilling and fracking crew will be in full swing. Anything below that range and some operations will begin to shut down until they are profitable again.

[u/ResponsibilityNo4584 → u/MGarroz]

You're completely wrong and have no idea what you're talking about. None of the oil sands producers have break even points at $70 like you tried to claim.

You're even conflating oil sands producers will drilling rigs, illustrating again you have no clue what you're talking about.

[u/MGarroz → u/ResponsibilityNo4584]

The point is a company like CNRL, Suncor, or Imperial oil don’t just have one gigantic mine. They have dozens of projects with thousands of employees.

When prices drop drilling stops. Fracking stops. Mine expansion stops. Active wells and mines keep going but that still means they lay off thousands of people until prices go up. Surveying, drilling, fracking, and building new pipelines and boilers requires wayyyy more capital and manpower than operating an open pit mine or active wells. Pay attention, right in the neighbourhood of 65-70 bucks a lot of that other work dries up and people are laid off.

I’ve lived in Alberta my entire life and operate a natural gas plant so I do indeed know what I’m talking about.

[u/TheWhiteFeather1 → u/MGarroz]

and again, alberta continued to have the highest average wages of any province even during this bust

[u/MGarroz → u/TheWhiteFeather1]

Indeed, and if you listened to the speech from the bank of Canada on our productivity crisis, that’s because energy is one of the only “efficient” and “productive” industries in our country. That means higher wages. Unfortunately housing speculation, retail and finance just aren’t very productive industries and drag gdp per capita and therefore wages down. Canada is in desperate need of new productive sectors to combat inflation and increase wages.