Falling oil prices: It’s not all bad

With speculation swirling about the impact of falling oil prices on Western Canada's housing markets, some experts suggest the decline will be good for Toronto and the rest of Ontario.

“I don’t expect there to be much of an impact due to oil prices,” said Ralph Fox, a real estate broker and director of new development at Sage Realty. “It’s actually good for consumers [in Ontario] because they’ll have more money to spend and feel confident enough to spend it.”

He added that the impact will be felt in oil-producing markets like Alberta and other provinces that depend on oil revenues to generate wealth and maintain a stable market. He also said that, as the U.S. becomes more energy dependent, there will be consequences on the global energy market.
The comments come a week after the Bank of Canada announced a 0.25 per cent drop in the interest rate, which now rests at 0.75 per cent. The BoC made the changes to prevent Western Canadian markets from entering serious decline due to plummeting oil prices.

“For our 2015 forecast, we could not ignore the potential impact of the steep decline in the price of oil on housing markets across Canada,” said Phil Soper, president and chief executive of Royal LePage, in a recent report.
“In the immediate term, we anticipate that the natural slowing of home price appreciation we called for in the third quarter of 2014 will be delayed in Central Canada and accelerated in the West by recent developments in the energy sector.”
Royal LePage, too, expects Ontario, and specifically, Toronto to benefit from lower oil prices.
“Ontario’s strengthened export economy buttressed by a flourishing U.S. economy and lower Canadian dollar; improved labour market trends; and unsatisfied demand from countless homebuyers who lost out in 2014 GTA bidding wars are expected to carry the all-important 2015 spring market,” the report stated.
Meanwhile, with interest rates at an all-time low, things should stabilize in Western Canada, according to the BoC.

“However, there is considerable uncertainty about the speed with which this sequence will evolve and how it will be affected by the drop in oil prices," stated the BoC. "Business investment in the energy-producing sector will decline.

“Canada’s weaker terms of trade will have an adverse impact on incomes and wealth, reducing domestic demand growth.”

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