A Crude Awakening: How the price of oil affects the housing market

The drastic decline in the world price of oil from $105(U.S) a barrel to below $70 a barrel is both good and bad. For provinces like Saskatchewan, Alberta and Newfoundland, who are large net exporter of oil, decreased global prices of oil would lead to reduced revenue. Prolonged low global oil prices could have a negative impact on Canada’s GDP, which in turn would devalue Canadian currency. However, in provinces like Ontario and Quebec, that have a large manufacturing sector, we are likely to see growth, due to decreased energy costs and increased exports to key countries.  With consumers playing less at the pumps, the purchasing power of average Canadians would also increase. Industries that rely on crude oil may pass on their savings to the consumers of their products, which in turn would increase their real income and further stimulate spending.  As a result, the economy would experience a boost that increases employment and growth. More money circulating in the economy will support our strong housing market and rising house prices. The decreased global price of oil will increase the Canadian aggregate demand for owner occupied housing.  This will also create more options for individuals entering the housing market and existing homeowners.