Oil prices have tumbled in the past couple of months, and the reasons are due to supply and demand. Alberta’s crude oil reserve is the third largest in the world after Saudi Arabia and Venezuela. 8% of the jobs in Alberta are directly related to energy and the indirect benefits of oil sands extend beyond Alberta’s borders, stimulating Canada’s economy.
From near $110 per barrel one year ago, the crude oil price has fallen to $54 per barrel. Alberta is producing oil like mad. Daily production in Alberta is about 2 million barrels, so over the next year, from September to September, producers in Alberta could lose $2.6 billion.
How do all these affect the real estate market in Calgary? So far the effects are nothing but psychological. Consumers are still making cautious purchases trying to get used to the daily news about declining oil prices. The short term impacts will be seen on prolonged sales time for midsized homes and high end homes which could lead in to higher inventory and lower prices.
Starter homes will be less impacted as rental rates are relatively high and the strong demand for affordable homes does not disappear overnight. The 2015 spring real estate market will reflect an overall increased inventory and steady housing prices.
Oil prices could hit as low as $45 per barrel by beginning of 2015 before it recovers to around $70 per barrel towards the beginning of summer. As long as depressed oil prices do not linger for a long period of time, the impact on the economy and the real estate market will be manageable.