Don’t look now but slumping crude prices have begun to hit the Canadian housing market like a sledge hammer. Energy accounts for 10% of Canadian GDP and around 25% of exports and the swift fall in oil prices is beginning to show its effects in Canada’s oil producing regions. Calgary is a great example where single-family home sales fell 35% in February in comparison to a year ago.
Alberta derives some 30% of its provincial revenues from energy royalties and as one TD analyst quoted by the Calgary Herald recently noted, “the effects of significantly lower oil prices had already turned up in resale activity, with sales in Calgary and Edmonton down more than 40 per cent and 30 per cent respectively, from October to January. As resale activity slows, prices usually follow.”
Over the last number of years with interprovincial migration to Alberta being not only supportive of, but such a strong driver of, escalating housing prices in Alberta along with cheap money and easy financing things do not look encouraging over the short and medium term for those who have chosen to join the highly leveraged herd of the prairies.