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The Tories Are Back: 2 Reasons Why and What it Means for Real Estate

I think that CBC’s headline says it best.

Albertans re-elect historic 11th straight Tory government There are two big reasons why Honest Ed won, and CBC points to them, if obliquely.

Driven by the booming oilsands, the province is grappling with major growth pressures, including a lack of affordable housing and aging infrastructure, as well as balancing environmental concerns with the massive oilsands developments.

Don’t underestimate Ed, or what he learned from Ralph. Remember that Ralph is a PR man, and a TV/Radio reporter. He’s a master at the art of perception. (And I voted for him) Ed learned a great deal from Ralph Klein, including the ability to be seen in action. Why did Ed win? Two reasons: 1. "Affordable Housing": When they changed the Residential Tenancies Act they did two things. First, they increased the notice period for going condo from 90 days to one year. This was (in my opinion) a good thing for most renters in the short term. What burden it created was borne by investors, who have money. It looked good for the politicians. And it will have very little impact in the long run for either renters or investors. They also increased the length of time between rental increases from 6 months to one year. This looked great for politicians. This had very little impact on intelligent investors, helped to weed out stupid/greedy investors. It did, however, cause an instantaneous spike in rents. Many management companies and owners automatically raised the rents for their vacant suites $150 or more. This ended up contributing to the rapid rise in rents. Now owners have to raise their rents beyond what they’re used to thinking of as a reasonable increase, because they’re trying to forecast a year in advance. Now, looking back, it’s had very little positive impact for renters, reduced affordability, and caused a little pain for some investors. Ed came out of it looking like a responsible man of action. 2. "The Booming Oilsands": Well, you don’t need me to tell you about the result of the Royalty Review. They raised the rates, looked good, and that’s about it. Some oil companies made a lot of noise. A few firms took a bit of a hit, and they could probably afford it. They made noise for about a month, then resumed putting money in to Alberta. Why? It makes good economic sense. Yes, investment might be a little slower than before, but that’s OK. It’s the difference between winning $15 million in the 649, and winning $16 million. That said, I think that more sustainable and forward thinking growth would be nice. I enjoy the growth and prosperity, however I do think about the Alberta my children will grow up in. Notice a recurring theme? Ed Stelmach is a good politician. I also think he’s a good guy, but notice how these two major issues were handled.

chrisdavies.ca - Southern Alberta Sky by MiguelB

    • They were done to maximize their appeal to the loudest voices. You may disagree if the action was right or wrong, but he took action on the big issues. That’s both smart, and good at getting votes.
    • They initially shifted the burden on those who were best able to bear it. That’s oil companies and real estate investors. The rental increases backfired on them, but no one is perfect.
    • In the long run, they make very little difference, except to make people think.

You draw your own conclusions. I’d have voted for him if I still had a vote in Alberta. What does it means for real estate investors? Stability. A solid economic future, at a more sustainable rate. The possibility of rapid growth is still there, but it’ll be essentially independant of what the tories do. A good leader with a strong majority who is not afraid of taking action after gathering some input and coming up with a coherent strategy. That’s not to say they won’t screw up, but I feel good about the next four years in Alberta.

Chris' Real Estate and Property Management Blog

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