Alberta flood’s cost estimates mount as Calgary real estate forecast looms
As flood waters recede across most of southern Alberta and preliminary assessments of the damages get underway, it’s looking increasingly like the disaster will be the most expensive in Canadian history, at least in insurance terms.
Attention is also turning toward the impact the floods will have on Calgary’s real estate market – one of the country’s strongest-performing regions before river waters engulfed whole neighbourhoods.
The first firm estimate on a total dollar figure hovers between $3 billion and $5 billion in net damages, according to Bank of Montreal. The bank’s insurance stock analysts believe that three quarters of the financial toll could be covered by policies, or between $2.25 billion and $3.75 billion.
That would make the 2013 flooding of southern Alberta the most expensive on record for insurance companies, eclipsing the $2.1 billion (2012 dollars) in insured losses taken in the 1998 ice storms that battered eastern Ontario, Quebec and southern New Brunswick.
Yet as more residents of southern Alberta were cleared to return home Tuesday, experts stressed rough estimates are just that.
“This is very preliminary and it will take time to refine estimates,” BMO analysts said.
“It’s early, and it’s going to be quite a long time before we know the true costs of what’s going on in Calgary,” said Paul Kovac, executive director of the Institute for Catastrophic Loss Reduction, which is affiliated with the University of Western Ontario and receives funding from insurance firms.
The province pledged on Monday $1 billion in immediate aid, some of the funds to be used to rebuild washed out roads and restore other key infrastructure.
The impact on the region’s real estate market is also largely unknown.
Home starts are sure to suffer as well as resale activity as sellers with damaged homes take their properties off the market.
“Resources will need to be diverted from new construction to repair,” Robin Wiebe, senior economist at the Conference Board of Canada said.
The Calgary Real Estate Board was scheduled to release its mid-year market report and forecast on Monday. The board aborted the plan because of the floods.
But remarkably, the board is expected to release Friday a revised forecast that takes into account the damage inflicted by the disaster.
“We wanted to pause and try to make some early estimates of what the impact will be on the Calgary market,” Doug Kirby, director of communications for the board said.
Kirby said CREB looked to the 2005 flooding of Calgary as well as international examples to inform the forthcoming report. He noted that the ’05 flood was “much smaller” in scale, but “that said, the market remained very strong.
“It’s hoped that something like that will happen.”
Calgary’s real-estate market has been among the strongest performers amid a national slowdown with year on year price gains of seven percent in April supported by “good valuations and strong job growth,” BMO said in forecast last month.
The Conference Board had been predicting price gains of 4.0 per cent this year and 5.6 per cent the next.
With about 12 per cent of the market affected by the flooding, CREB’s Kirby said the impact should be less than what some might fear.
“Overall, the Calgary market is likely to remain strong,” he said. “There are some issues though that are hard for us to predict.”