Dutch Disease: Alberta Canada vs. Norway

The term ‘Dutch Disease‘ refers to an increase in natural resource based economy crowding out manufacturing and other sectors. It’s also a stand in descriptor for taking all your winnings in a booming market and re-investing them in the same market.

When Oil prices were high, both the province of Alberta and the country of Norway benefited from a petroleum based economy, but they approached the future in different ways.

Brian Ripley over at CHPC summarizes Bruce Campbells take-away of the differences between these two economies approach to oil wealth:

Alberta’s so called “progressive” conservative governments; 7 consecutive iterations since 1971, have squandered their provincial energy resources leaving their treasury with a CAD 12 billion dollar debt and a 500 million dollar deficit.

Norway, a county of 5.2 million people (Alberta’s population is similar at 4.2 million), began their first successful North Sea oil drilling in 1971 and by maintaining sovereign control and creating partnerships with the private sector “… now sits on top of a CAD ONE TRILLION DOLLAR pension fund established in 1990 to invest the returns of oil and gas. The capital has been invested in over 9,000 companies worldwide including over 200 in Canada. IT IS NOW THE LARGEST SOVEREIGN WEALTH FUND IN THE WORLD”

Read the full article over at CHPC.

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Slagathor
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Slagathor

…What exactly do people feel they’re losing when tear-downs are torn down?..

Oh, I don’t know,…an affordable neighborhood maybe?

Shut It Down Already
Guest
Shut It Down Already

“…no house older than about 30 years is safe from the wrecking ball.”

Houses here are simply not built to last. Compare with Europe (I’m pretty sure Asians buy houses there too!) where solid brick construction is preferred to the crappy wood that’s popular here.

People often refer to 20+ year old houses as “old”. In Europe they’d laugh at anybody who made such a claim, where 100+ year old houses are commonplace.

Seems unfair to blame a specific section of the population for demolishing the cheap constructions of the past. But I don’t think fairness is part of your agenda.

What exactly do people feel they’re losing when tear-downs are torn down?

VMD
Member

As of June 1, 2015 CMHC is increasing its homeowner mortgage loan insurance premiums for homebuyers with < 10% down

April 2, 2015 — As a result of its annual review of its insurance products and capital requirements, CMHC is increasing its homeowner mortgage loan insurance premiums for homebuyers with less than a 10% down payment. Effective June 1, 2015, the mortgage loan insurance premiums for homebuyers with less than a 10% down payment will increase by approximately 15%.

Condoms
Guest
Condoms

Wouldn’t the past performance on the Island be more related to the lure of cheap US property + above par loonie a few years ago?

Cat in the hat
Guest
Cat in the hat

Anyone still believes US fed will rise interest rate is a fag.

Why US needs to increase their rates, with low inflation and expense US dollar?

It is all fake, my friend.

patriotz
Member

@69:”True, it’s probably not retirees yet as the bulge of boomers are still in their 50s.”

Problem is that this group of boomers is less afluent than the older ones who are already retired or close to it. Two reasons: the older boomers had the opportunity to buy into RE when it was much cheaper (i.e. 1970’s to mid-1980’s), and they had better job opportunities.

This might have something to do with the poor performance of the retirement RE markets on Vancouver Island and the Sunshine coast in recent years. The peak in demand may already be over.

Condoms
Guest
Condoms

Larry Yatter’s calling a spade a spade why a house just broke the 1.4m mark.

Red fire-breathing dragon$

Condoms
Guest
Condoms

True, it’s probably not retirees yet as the bulge of boomers are still in their 50s. It could be foreign or tech money. I’ve read how Victoria is becoming a hotbed for tech startups and I could see techies choosing condos.

patriotz
Member

@66: ” retirement town maybe ”

In fact the over-55 restricted condo segment is by far the weakest in Victoria, with some properties selling for less than they did 10 years ago (info from HHV).

If the condo market in Vic is indeed doing well (I don’t regard their HPI as very trustworthy) it’s in spite of demand from retirees.

space889
Guest
space889

@Slagathor – More debt??

Condoms
Guest
Condoms

It’s bizarre how condos are kicking a$$ in Victoria.

March VREB stats:
========= y/o/y%
HPI Condo 5.3%
HPI House 2.1%
HPI TownH 0.5%

I have no clue why??? retirement town maybe

Son of Ponzi
Guest
Son of Ponzi

#64
Re: Mini baby boom.
Just visit Richmond Centre to see it in action.
Usually, the Grandmother is here, too.

Slagathor
Guest
Slagathor

…“A mini “baby boom” of 25-34-year-olds in Toronto, who drove up the condo market over the past decade, are moving into the 35-44 age group, which “are prime backyard-hunting years,” Kavcic wrote. These home hunters will drive up the price of detached homes while reducing demand for condos.”…

Hmmmmmm, I wonder what those home hunters are going to use to pay for their new backyards if they can’t sell their condos.

Slagathor
Guest
Slagathor

…On a more serious note, if this is the kind of fast money that is being made buying old timers and building houses that get sold to HAM then it’s no surprise that so many homes are getting torn down….

Not sure why this is a surprise to anyone. This kind of profit margin is exactly what’s been driving the destruction of the west side over the last 10 years and why no house older than about 30 years is safe from the wrecking ball.

southseacompany
Member
southseacompany

“No market crash until …”, Canadian Real Estate Wealth magazine.

http://www.canadianrealestatemagazine.ca/news/no-market-crash-until–189814.aspx

“As Bank of Canada Governor Stephen Poloz defends the BOC’s low interest rates, experts suggest that any correction in the Canadian housing market will hold off until the interest rates rise”

“Although it’s clear that most of Canada’s housing markets are priced to perfection, I think that any market crash will be preceded by a material increase in medium-term interest rates, since most Canadians seem to select a three- or five-year fixed rate with a long-term amortization period,” said Jeff Baryshnik, president of Republic Funds.”

“Baryshnik said: “I think that artificially high valuations will persist as long as artificially low medium-term interest rates, however long (or short) that may endure.””

southseacompany
Member
southseacompany

Maple Ridge Times: “Rising prices impact affordability in Maple Ridge, Pitt Meadows”

http://www.mrtimes.com/news/rising-prices-impact-affordability-in-maple-ridge-pitt-meadows-1.1811359#sthash.mLbjBhOn.dpuf

“What is now a relatively affordable housing market in Maple Ridge and Pitt Meadows won’t likely stay that way over the next decade-and-a-half, according to a recent report from Vancity.”

southseacompany
Member
southseacompany

“Housing market softening everywhere but Toronto and Vancouver, BMO says”, CBC News

http://www.cbc.ca/news/business/housing-market-softening-everywhere-but-toronto-and-vancouver-bmo-says-1.3019181

“The much-ballyhooed “soft landing” in real estate may already be underway, Bank of Montreal says, as booming price gains in two of Canada’s three biggest housing markets are the exception rather than the rule in the rest of the country.’

RFM
Guest
RFM

The VANCOUVER REALTOR HUNGER INDEX is the percent of realtors who earned no commission income for the stated month. For March 2015 the VRHI was 39%. How does this compare? The 18-year average for March is 41%. At 39%, the 2015 March VRHI was higher than 7 years and lower than 10 years since 1998. A strong month for sales and price increases that continue to impress and amaze!

Details and comparison data for 18 years at: http://vancouverpeak.com/showthread.php?tid=64

condoconundrum
Guest
condoconundrum

#49
It is to be expected
Just look at who is running this circus we call a government

http://thecanadianpoliticalscene.blogspot.ca/2012/07/harper-guided-by-evangelical-alliance.html

patriotz
Member

@47: “Norway costs to produce a barrel of oil are about 20% less than Alberta”

That’s true on average now, because so much of current Alberta production is from recently developed tar sands sources at high cost, while most current Norway production is from older offshore wells.

It wasn’t the case for decades after Norway started offshore development around 1970, when Alberta production was entirely or largely from cheaper conventional wells and Norway’s production was more expensive.

“Alberta is part of Canada so it has to pay billions a year in transfer payments to welfare provinces like Quebec and the maritimes.”

Those payments are made by the Federal government, not the Alberta government. They are borne by all Federal taxpayers (including those in Alberta of course) but they are not a cost to the Alberta treasury.

southseacompany
Member
southseacompany
“Oil crash pits Bank of Canada against the Fed as interest rates set for rare divergence”, Financial Post http://business.financialpost.com/news/economy/oil-crash-pits-bank-of-canada-against-the-fed-as-interest-rates-set-for-rare-divergence “The Bank of Canada is fighting the Fed for just the second time in two decades, joining global peers that are cutting interest rates as the U.S. is poised to tighten. Blame it on the oil crash.” “The Federal Reserve will raise its key rate as early as June, while borrowing costs in Canada are headed lower even after the surprise cut in January, economists predict.” “That would mark a rare divergence between the two key rates given how closely Canada’s economy is linked to the U.S.” “The divergence is a testament to Canada’s gathering difficulties — bloated consumer debt, lackluster business investment, stagnant exports, depressed oil prices and stubborn labor-market slack.” ““There are some built-up stresses in the system around… Read more »
southseacompany
Member
southseacompany
“‘Soft Landing’ In Housing Market Underway, Condos Headed For Lengthy ‘Stagnation’: BMO”, huffington Post http://www.huffingtonpost.ca/2015/04/01/condo-prices-bmo_n_6987320.html “• Upgrading to house in the suburbs becoming less realistic • Condo-house price gap likely to get much bigger as population ages • ‘Prolonged stagnation or very sluggish growth’ in Toronto condo market” ““Canadian home price gains are now almost purely a two-city phenomenon,” BMO senior economist Robert Kavcic wrote, referring to Toronto and Vancouver.” “And even within Toronto and Vancouver, price growth depends on the specific type of housing. While single-family home prices have soared by 25 per cent in the past three years, condo prices have grown only 10 per cent in that time.” “A mini “baby boom” of 25-34-year-olds in Toronto, who drove up the condo market over the past decade, are moving into the 35-44 age group, which “are prime backyard-hunting… Read more »
Oracle
Guest
Oracle

The dumbest people on the planet must be the commentators on garth’s blog. They are silenced into submission and won’t dare mention HAM or foreign money…losers..

They still think locals are buying $2 million dollar homes with carrying costs around $10,000 per month after taxes.

Shut It Down Already
Guest
Shut It Down Already

#2, you do realize that Canada is considered to be one of the least corrupt countries in the world? Get a grip.

flaneur
Guest
flaneur

@48, the trend is if something is done over there, we are more likely to follow suit.
Latest news. Operation foxhunt 2015 will be hitting Canada soon. Top on the list is the s-i-l of the expelled former security chief, and the niece of the former chairman of Central Military Commission. Together, the extended families siphoned billions out of state-owned enterprises.
http://tinyurl.com/py7nc99