What will be the long-term impact of oil price decline?

by Jennifer Paterson18 Dec 2014

Investors hoping that dropping oil prices would give them a foothold in the Calgary housing market might not see the drop in prices they had hoped for.

Glenn Herring, a RE/MAX Realtor based in Calgary, said: “It’s my opinion that any correction in the market is going to affect properties in the $500,000-plus price range more than the properties in the up to $500,000 price range, which is the starter price range in Calgary.

“The reason I say this is that there are always first-time buyers and that makes this segment of the market more resilient to market corrections."

The direct impact of falling oil prices on the Calgary housing market has yet to be felt, but the first quarter of 2015 will be an interesting one for investors.

Herring added: “The real estate market in Calgary has slowed down a little bit from its torrid pace, but whether that’s a direct correlation to the falling price of oil, or if the Calgary real estate market has felt the full effect of the falling price‎ of oil, is yet to be determined.”

The Calgary Real Estate Board has said stable conditions are expected, given forecasts for employment and migration, but asserted that estimates could change depending on the extent and duration of oil price declines.

Ann-Marie Lurie, CREB’s chief economist, added: “Concerns over the potential impact will influence consumer confidence. This is expected to cause supply and demand to ease in 2015, maintaining resale market balance and keeping prices relatively stable.”

However, a report recently published by RE/MAX, said that falling oil prices will impact Calgary’s real estate market in the coming year, causing home prices to slow to only three per cent; this, compared to a six per cent rise in average sale prices in 2014.

The report did stipulate, however, that, unless low oil prices remain for a prolonged period, home prices are unlikely to experience a significant decline.

Duane Ritter, a real estate agent at RE/MAX in Edmonton, said: “Like most markets right now, it really depends on how low the price goes, but mainly how long [it stays] at the lower prices.”

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