University Towns Are Great Environments for Business and Are Still Prospering

Interesting article from ABC money news that you can take a look at here.


States that university towns are not facing the "squeeze" the recession.


Here's their stats:

• Provo, Utah, where the university is located, has added jobs to its economy. Over the last year, there's been a 2.97 percent rise in jobs in Provo; the national unemployment rate has now hit 8.9 percent.
• There are also business booms in college towns like College Station, Texas (home to Texas A&M and up 2.06 percent); Baton Rouge, La. (up 2.16 percent), which Louisiana State calls home; and Durham, N.C. (up 2.49 percent), where Duke University have been major drivers of economic activity.

Why?

Research universities tend to be great environments for business, as they're flush with cheap, highly talented labor (recent grads), and the massive research and development budgets universities have. Plenty of the world's top companies, including Dell, Cisco Systems and Google, began in university settings.

So how does this effect the real estate market?

Going to Zillow (why can't we have this site in Canada) we can take a look:

Provo Real Estate

The Zindex for Provo shows that prices have fallen 8.8% from last year and about 15% off the peak. In comparison, according the same ZINDEX, America has a whole has fallen 14.2% and 21.8% from the peak.

Have a telescopic view and MAKE MONEY

To make money in real estate...in fact any investment vehicle, you must have a long term view. Look what the numbers tell you about the future.


How do we determine a future in real estate: we study fundamentals from people who don't care if I buy real estate or not.

So here's a sample of what I look at:




From this Graph, I want to pick the winner so lets analyze this data compiled from the Alberta Governement.

Compared to all of Canada, Ontario, and BC. Alberta's population increased the most, it lost the least amount of jobs, and its wages increased the most.

Based on these facts, I'm going to do a a thought exercise:

If population of the province increases won't the demand for housing increase?

Won't it make sense that there will be more renters? Could this not lower vacancy rates and drive up the rents?

In addition, 2-3 years from now won't there be more people available to buy homes? Won't this drive demand for homes higher than any other province?

And if the wages are increasing and the number of jobs are stable won't that mean that more people can afford housing?


Ok, let's look at GDP

In 2008 Alberta was near the top in the country in percentage increase in GDP and according to TD bank, this year Alberta will be near the bottom in GDP in terms of change in GDP and in 2010 will be back near the top.

What does this tell us: a temporary downturn where you can invest on sale.

As an aside, TD expects BC will lead the country for GDP growth in 2010. Why? Let's think: where is the location of the biggest sporting event in the world? umm Vancouver. Wouldn't having millions of people visiting and the construction that goes along with the Olympics have a huge effect on their economy?

Of course.

Study the numbers, see what they are telling you and take action. If you get stuck in the moment without a long term point of view your chasing shadows and will lose.

OIL PRICES SET TO SPIKE AGAIN?

Oil and gas prices over the years have become a huge expense. More than ever people are watching world oil prices and more specifically the prices that they pay at the pump.

I came across an article in the Economist that predicts that

“The precipitous fall in oil prices over the past year may just be paving the way for another spike"

See Article Here.


After reading the article, I have to say I agree with some of the key points.

First, at the end of the day, world oil prices are a function of supply and demand. We know that currently demand has been on the decline because of the global recession. However, over time, world economies will start to grow again and invariably increase their consumption of oil. When this happens, prices will start to rise again.

The oil future market is already pricing in a increase in oil price (just look at the recent run up in oil prices; from $35/barrel to $60/barrel.

Secondly, oil companies across the world have been cutting their production and exploration activities (given the lower prices for their product). Now this is fine because demand for oil is much lower, but this level of supply will not be sufficient when world economic activity picks up. So what will happen? Prices will increase substantially.

Therefore, oil rich countries such as Saudi Arabia and Canada will benefit tremendously - just look back at the oil boom in Alberta over the past 4 years. The oil boom in Alberta occurred because the oil price was rising, oil profits were increasing and oil companies were investing billions of dollars to extract oil in the province ($100-$150 billion dollars in Alberta alone!)

History always repeats itself and so it looks like the stage is being set for another oil boom.

So this might be a time to get back into oil and invest into regions that will benefit from higher oil prices.


Ajayan Sritharan
Real Experts

Do you want facts or sugar coating?

Here are sample of my sources no particular order:


CMHC
Statistics Canada
Canadian Real Estate Association and their particular local boards
Alberta Finance
City of Edmonton
Canadian Association of Petroleum Producers
Alberta Energy
Federal Reserve Bank and their particular state representatives
Moody's ($300/report)
IMF (International Monetary Fund)
World Bank
Canadian Bankers Association
Trends Research Institute ($185/year)
Urban Futures Institute
University of Toronto Innovation Systems Research Network
Centre for Urban Studies at the University of Toronto
Economic Cycle Research Institute
Urbanation
Centre For Spatial Economics
Genworth
Conference Board of Canada ($5,225/year)
RBC Economics
Scotia Economics
BMO Capital Markets
TD Economics
CIBC World Markets

Be contrarian: Be a real estate Hero

I often get asked why are you investing in Alberta when you are from Toronto? It's an excellent question. I'm not going to say the GTA is a great place to invest into and hope the property will do well.

Simply put: I never HOPE. I always make expectations based on fundamentals.

I can invest anywhere in North America, I choose Edmonton because the fundamentals show growth long term.

I know my goal is to make money for my partners, in order to achieve that goal I have to do things that are uncomfortable.

It can be hard sometimes pushing through. I have to get past the dominant thinking from my friends and colleagues, many who are rightfully scared, to achieve these goals.


When things go as planned, It may look like luck from the outside...It requires constant diligence, education and action.

So what does this mean for you? study the fundamentals especially from people who present facts and don't care if you buy real estate or not.

Lost your Job? Frustrated? Let's Blow up some houses!

It has come to this in real estate in the US...where the economic fundamentals in some neighborhoods are at a point where it makes more sense to destroy a subdivision than it was to actually find a buyer.

I went to Rochester and I was amazed to see that jobs were leaving faster than people were. Imagine a place that nothing real big has happened before the 50's. The place is dead...33% of all buildings in some neighborhoods are abandoned (I get emails from folks selling real estate in these neighborhoods, I blogged about my research here).

According to Wikipedia there are 123,833 homeless people in the States.

Something to think about

Cheers

If real estate is not going up...MAKE IT!

I’m getting excited thinking about how we could position ourselves after this meltdown. Not only because of US tax policies, but because of they’re crazy immigration policies as well.

The US is clamping down hard on their skilled worker visa known as the H1-B. Thousands of highly skilled workers will be out of a job or have already lost their jobs (see here).

Major US employers (IT companies such as GOOGLE, MICROSOFT, all US Banks, top financial services and manufacturing companies) who use these skilled employees will be forced to let them go by April 2010 because they will be denied visas.



These companies are going to lose their competitive advantage.

What are they going to do?


If I’m Harper I'm revamping our immigration policies ASAP

If I'm Dalton I'm calling IBM, I'm calling Microsoft I'm calling XEROX, DELL, Sun Microsystems and ask them what would it take to move those skilled jobs over to the GTA.

If I’m Dalton, I’m calling CPP, OMERS and OTTP to partner with them to create a centre of excellence in pension fund management in Toronto.



If I'm Dalton I'm going to partner with our chartered banks to set up a centre of excellence in risk management - the world wants to know why our banks are amazing. I'm going to ensure Bank of America, Citi, JP Morgan Chase and Wells Fargo to set up shop on Bay St

If I'm Stelmech, I’m calling every Silicon Valley corporation...Apple, EBay, Intel, HP, and Google …to move a massive chunk of their operations to Edmonton and invest millions in U of A - turn E-town into Waterloo West.

If I'm Stelmech, I’m going to turn Calgary into an energy power house...not just in Oil and Gas, but in alternative energy as well.

If I'm Canada I’m rolling out the red carpet at every border. I'm going to bring back the Canadian spirit of aspiration, inspiration and perspiration …I’m also going to buy lots of real estate in the GTA, Calgary and Edmonton.



CHA CHING!