As oil prices fall, so does some of the Calgary housing market. Feeling the effects of a drop in oil prices, down to approximately $60 per barrel at last report, the real estate market is seeing a slightly negative effect with home prices dropping and the number of home listings rising.
While the Calgary market sees a large number of oil-related price adjustments, the Vancouver and Toronto housing markets are largely unaffected. December 2014 sales were down 7.5% over the previous year for Calgary. Meanwhile, Vancouver saw a rise of 7% and Toronto saw a rise of almost 10% during that same time period.
While there might be some risks in Alberta for the housing market due to the oil-rich area, overall Canada does not appear to be negatively impacted. Even with the oil market seeing a downfall in recent months, this does not necessarily affect the entire Calgary housing market either. One negative downfall for one local economy does not necessarily translate to negative downfalls for the areas other economies.
RBC Royal Bank of Canada released a report indicating that house prices are predicted to rise in Alberta in 2015 and 2016; however, the prices will increase by less than 2% the first year and a paltry .1% in 2016. Furthermore, the report indicates that overall sales are projected to drop in the next two years as well. In contrast to recent years that saw a quicker pace of sales and prices, the next two years may prove to be the slowdown for Alberta, and in particular, Calgary, that many economists predicted would come.
With weaker employment and less income activity – some oil companies, such as Shell and Suncor, are already downsizing their work force due to lower oil prices – the real estate market in Alberta should expect less resale properties coming to market and less new construction. Sales for January of 2015 are already proving to be the second lowest in more than fifteen years.
The local Calgary real estate market is starting to see a flood of new inventory come online. With this surplus of available houses, home prices are sure to be driven down and many current homeowners may just be in over their head, while potential buyers step aside to ride out the next housing shift. If oil prices remain low for a long time, the Calgary housing market could linger at this lower threshold.
A balancing of the housing market is the most likely outcome of the lower oil prices. In particular, the Calgary area will primarily feel the balancing effects with real estate home prices affected, inventory levels changing, and overall sales figures shifting.
Despite the drop in oil prices and anticipation that oil prices will remain at relatively the same for 2015, the government does not expect to take any intervention measures. Overall, this shift in the housing market should be considered moderate when looked at on a long-term continuum.
If you live in Calgary and are planning a move – regardless of the oil prices- contact our team of professional Calgary relocation experts for a quick and hassle free quote.