A Brief Overview of the Economy and Real Estate Situation in Fredericton, NB
Fredericton is the capital city of New Brunswick and is the third largest city to be a provincial capital in Canada. Most recently touted for its electronic innovation, Fredericton has a rich history and culture, and plays a very important role in the Canadian economy.
The Local Economy
The local economy was once based on the lumber industry. After this industry declined, the provincial government became the main employer in the city. The education sector, with many high schools and two universities, is also a major employer in the city. The recent influx of international students has been the basis for most economic activity within this sector.
The provincial government has actively invested in the IT sector, resulting in the city being titled as one of the top new technology boom towns of the world by Business Magazine. Fredericton is also known for its culture and cuisine, which is greatly enhanced by the presence of international students. The recent boom in technology-based ventures has given birth to several 3D animation schools and institutes along with several new IT based institutions.
Fredericton is also home to CFB Gagetown, a huge commonwealth military base which contributes about 220 million dollars to the city’s economy. Research centers and customer support centers are also an important contributor to the local economy.
The population is well over 300,000 (within a 100km radius of the city) and rising. The city is sixth in standard of living and has shown major potential for real estate business investment. As a result the population is rising and the influx of immigrants has increased. However, the provincial government is encouraging more immigrants as the population of senior citizens is rising, and there are currently not enough employees in the labour force to fulfill the city’s growing needs.
75% of the city’s population speaks English only, whereas about 24% are bilingual with French being the second language.
Labeled as the second in best real estate deals in Canada by MoneySense, and the 22nd in the world for housing availability, Fredericton has an extremely versatile real estate market.
The recent influx of international and national students means a rise in demand for rental apartments. And the steady increase of senior citizens living in the area means that the demand for retirement homes is also on the rise.
The boom in the IT sector ensures the creation of several technology related jobs, which means that tech experts from all over the country and the world are interested in coming to Fredericton. That will result in an increased demand for first homes and family homes.
The cultural activities in the city are also on the rise. The food sector is doing especially well, with many new restaurants opening in the area. This has resulted in an increased demand for commercial property.
*The tables and figures are courtesy to CMHC.
Mortgage and Interest Rates Forecast
A recent report by CMHC stated that the forecasts indicate low interest rates throughout 2012. This sentiment was then later echoed by Bank of Canada Governor, Mark Carney, himself in his latest interest rate announcement. While Mr. Carney did suggest that rates may rise around the country by the end of next year, it’s thought until that time they’ll remain at the historical lows Canada has been enjoying since the recession. If the rates do increase late in 2013, it’s believed they will still be very low compared to prior years. CMHC reported that the posted mortgage rate for 2012 is expected to remain somewhere between 3.1 to 3.6 percent. For those interested in a five year posted mortgage, including the year 2012, the rate is expected to remain between 5.0 and 5.4 percent.
It is important to realize at this point that although these figures are based on careful calculations by some of the most respected real estate industries in the country, the housing market is still a financial market. As such, they are still susceptible to change based on a number of circumstances.
The CMHC forecast for the one year posted mortgage rate in 2013 is 3.5 to 4.1 percent, and the five year posted mortgage rate starting from and including 2013 is 5.1 to 5.6 percent.
Sales Prices and Vacancy Rates Forecasts
The sales prices in Fredericton are expected to stay somewhere between $175,500 to $179,500 for 2012 and 2013. Although the CMHC based these numbers on the first quarter of 2012, the numbers may vary as a result to increase in demand.
In 2011, Fredericton had the lowest vacancy rates in New Brunswick. The construction activity has been high in apartment buildings, and is expected to contribute towards a rise in vacancy rates in later 2012 and early 2013. The forecasted vacancy rate by CMHC is 2.8 to 3.4 in late 2012, but it may rise as the influx of students increases in the area.
Discussion and Conclusion
In light of the facts, figures and the CMHC forecast, it is safe to say that Fredericton is one of the best places to invest in Canada. The real estate rates after the global financial crises did not plummet, and have stayed relatively steady when compared to other real estate markets. The forecasts for the last quarter of 2012 and for 2013 are generally positive and it seems that the demand for housing will increase in the near future.
With an increase in demand for housing, the real estate values will rise. However, selling in the near future in not recommended. Instead, investment in rental properties will prove to be a wiser venture. Investment in residential real estate is not recommended for investors looking for a quick buy and sell. However, it is strongly recommended for home starters and families looking for a place to settle down.
With high economic, cultural and technological activities, Fredericton is the city of the future. It offers versatile job opportunities, great standard of living and low real estate prices. The time is right for investing in Fredericton real estate.
With the local government actively encouraging immigrants to come to Fredericton, the city’s population is on the rise. The current forecasts indicate that the values will keep rising at a steady pace, so people willing to take out mortgage should make the final decision as early as possible. People looking for safe investment opportunities in commercial and/or residential property are strongly advised to consider Fredericton.