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| Last updated at 8:33 AM on 28/08/07 |
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Ian Ellis of Ellis Construction is excited about what the Hebron deal may mean for the residential construction market in the region. But he is concerned about the increased demand on labour and wonders where workers will come from to meet that demand for new home construction. — Photo by Kirk Squires/The Packet |
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Busy times ahead 
Real estate market preparing for Hebron
KIRK SQUIRES
Transcontinental Media—Clarenville
Real estate is a strong signal of a prosperous economy. Take, for example, the cost of real estate in the oil boom areas of Alberta. Getting a high paying job in those areas is not a problem. Finding a place to live is.
Compare that to some rural areas of Newfoundland and Labrador where you can buy a moderate-sized home for a fraction of what it would cost in Alberta.
But in growth centres such as Clarenville and Arnold's Cove the real estate market has remained strong.
That market will likely get stronger thanks to last week's Hebron announcement.
The Hebron partners - Exxon Mobil, Chevron, Petro-Canada and Norsk Hydro Canada - will use a gravity base structure (GBS) to develop the field. It will be smaller than its Hibernia counterpart with one drilling rig.
James Bates, vice-president and general manager of asset development for Chevron has confirmed the GBS will be built at Bull Arm.
That news will certainly increase the demand for real estate in this region and, as with any other industry, prices are driven by supply and demand.
Neil Norcott, broker/owner of Clarenville and Cormack Realty, saw the impact Hibernia had on the local real estate market. He expects to see it happen again with Hebron.
"Based on how the Hibernia project went, there will be an increase in demand," he says.
Because of continued growth, the town will be able to offer a fair number of accommodations, but it likely won't be enough to meet the demand.
"That, in itself, will drive property values, drive the rental market and... should provide the community with an opportunity to see growth and expansion that we haven't been able to experience in the past," says Norcott, who has 16 years' experience in the real estate industry. He suggests that growth will be different than it was in the Hibernia years.
"We have much more infrastructure now, a much more established community and have many more developments and future developments that can sustain growth than we ever did. Because of that we should be able to see the community grow like it has never grown before."
Strong market
But Hebron is not the only driver. Clarenville's market is anything but stagnant. In fact, Norcott says it has been a very busy year for real estate in this region.
"Speculation over the second refinery has been the main driver because Hebron is only now back in the news.
"Speculation on any type of expansion in the oil industry has been driving our market and right now we are seeing property values probably at all time highs and that is only going to go higher," he says.
"There is nothing in the near future that would indicate any reduction in value here."
Last week's announcement will also likely cause developers to get housing developments moving sooner rather than later.
But new home construction may be tempered by a shortage of available labour.
"If you were to try to get someone to do a (construction) job for you today you probably wouldn't get anyone who could start for quite some time down the road. That is only going to get more difficult," suggests Norcott.
"Where the workers are going to come from is probably the biggest question we don't have an answer to."
It's a question being asked by Ian Ellis of Ellis Construction.
Ellis says he has crews working "flat out" all summer on new home construction.
"Right now, I can't imagine it getting more busy than it is now, but I know it is going to."
He says while the news about Hebron is fantastic for his business and the construction industry in general, he sees challenges ahead for the industry. The biggest challenge is labour.
"It is great news but there is a downside as well."
He speculates many of the skilled trades that are currently working in the construction industry will be grabbed up to work on this mega-project.
"Where are the people who are now working for contractors going to go? They are going to go where the money is."
He says the wages will have to go up and that increase in labour costs will directly impact the cost of building a new home and further drive the real estate market.
Higher demand, higher costs
One of the factors which may also increase demand in this region is the comparatively lower real estate cost than areas like the northeast Avalon.
"I don't think Clarenville will ever get to a point where we will lead, or be equal to, the city (St John's) in property values," says Norcott.
"You will see the city grow strongly and we will follow behind it, but I think it is fair to say there will always be a gap in value. We just don't have the infrastructure or the supply of people to be able to compare one to the other."
Will certain types of real estate be more in demand than others?
Drawing on his years of experience, Norcott says the demand will be right across the board from rental properties to executive style dwellings.
"Based on what we have seen, you will find there is going to be a big demand from the general construction worker/tradesperson -single individuals, couples and families.
"Generally, the demand for that type of person will be a bungalow with or without an apartment. Some of these people will also build or want to buy houses that are of the executive style.
"There will also then be an administrative component (to these megaprojects) and these people usually look for executive style properties.
"What we should also keep in mind is the rental market will see the biggest increase."
Norcott is also hopeful the project will generate an increase in the commercial sector in the region, specifically manufacturing and the supply sector which will further add to the continued and long-term growth of the region.
The Packet
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28/08/07
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