News: Oil fuels Canada property boom

Tue, 06 Nov 07

As the world’s energy supplies come under increasing scrutiny, oil reserves as far a field as Mongolia are generating a wealth of excitement, and leading to a surge in local property markets...

Apartments in key oil districts are generating yields of up to 24% and capital appreciation in the region of 30% in Canada and Mongolia respectively. Ft. McMurray, a city in Canada’s north eastern province Alberta is creating waves in the oil industry. Commonly dubbed Ft. McMoney thanks to its profit making credentials, the US government has named the city as the preferred solution to replace the United States’ dependency on Middle East oil.

Severe shortage of accommodation

As the largest source of oil in the world, and with reserves bigger than Saudi Arabia’s combined, Ft. McMurray is considered to be at the heart of Canada’s oil production, and has the capacity to produce phenomenal amounts of the fuel. Indeed by 2015, the area is expected to produce over 3.0 million barrels of oil per day.

Today though, oil sand workers are battling a severe shortage of local accommodation and are currently being housed in camps on site. Demand for new residential accommodation is therefore enormous and with occupancy at 99.7%, rental yields of up to 24% are being achieved.

Capital appreciation is also high at around 20% meaning investors are faced with a wholly positive real estate outlook. Investing now will allow them to ride the wave of success that Ft. McMurray is enjoying and should guarantee very significant returns.

Dramatic squeeze on demand

Similar opportunities exist in Ulaanbaatar, the operations centre of some of the world’s largest mining companies. With large coal reserves, several un-tapped oil fields and the largest and highest deposit (2.85%) copper and gold mine in the world, significant growth has been seen in the country’s entrepreneurial businesses.

Supply of local accommodation though is still very limited which has led to a dramatic squeeze on demand. Rental yields of 13% net are achievable on city centre apartments whilst capital growth is estimated at a staggering 30%. These phenomenal rates are likely to be further bolstered by increasing banking confidence which should sustain growth over the long term.

It seems then, that oil reserves may just be a pre-requisite for some of the most profitable real estate investment opportunities around at the moment.

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