With Calgary as the energy capital of Canada, and home to the head office of most major oil and gas companies, one would expect that as oil prices fall so do home sales. Certainly, a market drop for energy should equate to a market drop for real estate. That is not the case, according to recent findings from the Calgary Real Estate Board (CREB). Over a one-year period, real estate prices increased and month over month sales continue to show the same trend.
With the third largest reserves in the world, behind Venezuela and Saudi Arabia, Alberta produces almost three quarters of Canada’s crude oil and more than three quarters of the country’s natural gas. Calgary is home to millions of dollars in investment in the energy sector. In addition, that translates to a lot of money invested in the local real estate market. With oil as one of the most important drivers of the local and regional economy, the decline in prices of oil over the past year to two years has been of concern. In previous oil price decreases and crashes, the housing economy has been hit especially hard.
Despite the drop in oil prices, recent reports show that the strongest growth has been in the condominium and townhome real estate sector, even though single-family homes are showing growth in market prices as well. The market for this smaller type of property is tight and demand is high. Especially given that in Calgary, single-family homes are not nearly as affordable of an option for young or entry-level buyers. In September, there was a jump in condominium sales by more than thirty percent alone.
For now, Calgary has weathered the oil price decline. Nevertheless, economists warn that if the energy sector continues to see a decline the effect will be domino. Wages will be cut, government finances will be taxed, jobs will be reduced, and homes will potentially lose property value if residents clamor to get out from under a mortgage in a hurry. Not only does this potential drop in value affect the housing market, but the commercial real estate market as well.
The oil sector is not all doom and gloom, however. Prices are beginning to stabilize and even increase ever so slightly, indicating that oil companies may see a rally in stock prices. Canadian oil companies and producers have also made efforts over the last several years to improve their refining and distribution methods. These energy sector investments may pay off as local Calgary residents continue to invest into properties in the area. Because a long-term economic need can equate to a long-term market need for residential real estate.
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