Expectations that northern B.C. will drive most of the province’s growth during the next decade have sparked a real estate boom that could be a minefield for investors.
Real Estate Investment Network CEO Don Campbell told Business in Vancouver that it makes sense to invest in rental properties in towns like Fort St. John and Dawson Creek because of area mega-projects, high rental rates and relatively low vacancy.
But he said investing in homes in other parts of the north, such as Prince George and Kitimat, is riskier because few megaprojects have yet to be confirmed.
A March 14 Canada 1 Credit Union report projected that strong demand for coal, natural gas and copper would spur development across B.C.’s north in the next few years and drive a more robust economic growth than Metro Vancouver’s.
Campbell agreed with the report. He said B.C.’s north provides some of the best real estate investing opportunities in the province.
But he cautioned that investors could get caught up in speculation.
“We saw that happen in the leadup to the Olympics,” Campbell said. “Everybody ran to Squamish because they thought it was next to Whistler. The thing they didn’t understand was that there’s no mountain there for skiing.”
Speculation over northern B.C. megaprojects and job creation includes the possibilities that:
•Enbridge Inc. (TSX:ENB) will win approval to build its $5.5 billion Northern Gateway pipeline from the Alberta oilsands across northern B.C. to a new marine terminal in Kitimat;
•BC Hydro’s $8 billion Site C dam project in Northeast B.C. will be approved; and
•eight mines generating $3.5 billion in economic activity will open following the $400 million electrification of Highway 37.
Real estate investors are consequently salivating at the prospect of new jobs driving a population boom and a housing crunch.
At the end of 2011, the price for an average detached home in Fort St. John was $323,608. By February, according to Multiple Listing Service statistics, that price was 15% higher: $372,143.
Fort St. John realtor Mitch Collins said the community’s small size adds to housing price volatility and that home values have actually risen about half that 15% figure.
He added that even if B.C. Hydro’s proposed Site C dam hits snags, investing in the region makes sense.
“We’re just seeing the tip of the iceberg. There are major projects that are moving forward right now that will have dramatic impact. That’s why there’s a lot of people investing in this region.”
Maple Ridge chiropractor Matt Boser started buying multi-family properties in natural-gas-rich Dawson Creek in 2008. He now owns 20 units in Dawson Creek and nearby Fort St. John, where a $297.9 million hospital is under construction.
All of Boser’s homes are rented. The average one, he said, brings in about $2,500 per month in rent whereas his mortgage, taxes, property management expenses and utility costs are about $2,100.
He looked for properties in Metro Vancouver, but found that rents could not provide cash flow once all carrying costs were paid.
“The mortgages are being paid down every month [in Fort St. John and Dawson Creek],” he said. “There’s positive cash flow, and the value of the properties are going up. That’s the key. You don’t want to buy a place that has great cash flow but is going down in value.”
Chris Mapson has had that experience. He and his wife lived in Prince George between 2007 and 2010, when they moved to Kelowna.
They had bought a home in Prince George for $329,000 in 2007, but were unable to sell if for $290,000 in mid-2010. After showing the home 65 times and getting no offers, they decided to rent it because the cash flow was more than their cost to rent a place in Kelowna.
The experience has left Mapson skeptical about home prices spiking across the north.
He said there are pockets of northern B.C. that are great to own property, but that investors should do their homework and not be lulled into a sense of false security by projections made by organizations such as Central 1 Credit Union.
“There are spin doctors who are cooking it up and northern economic development people who are spinning it one way,” he said. “There’s a lot of smoke and mirrors.” •
Major projects drive real estate value
Northern B.C. opportunity inventory rising
Property values in Fort St. John and Dawson Creek are soaring as investors attempt to cash in on housing demand spurred by a booming economy thanks to various projects to exploit natural gas, construction of a new hospital and potential construction of BC Hydro’s $8 billion Site C dam
Terrace
$404m Northwest Transmission Line and various mining projects that could total billions in investment
Fort St John and Dawson Creek
•$7.9b Site C hydroelectric dam
•Billions in various natural gas projects
Kitimat
•US$3.3b Rio Tinto Alcan alumnum smelter upgrade
•$5.6b Kitimat LNG facility
•$5.5b Enbridge Northern Gateway pipeline
Prince George
•$600m Endako Mine expansion
•$915m Mt. Milligan Mine
•Various logistics and transportation rebated investments
