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What Do Falling Oil Prices Mean for the Real Estate Market in Kelowna?

 There are many great Kelowna area homes for sale. Click here to perform a full home search, or if you're thinking of selling your home, click here for a FREE Home Price Evaluation so you know what buyers will pay for your home in today's market. You may also call me at 250-717-3133 for a FREE home buying or selling consultation to answer any of your real estate questions.

We keep getting the same question over and over again, so today we thought we would set out to answer it. Many people in Kelowna and surrounding areas are asking: What effect will falling oil prices have on the local real estate market?

We don't have a crystal ball here at the office, but we do have the experience to venture an educated guess. Currently, the resource market is suffering - there have been many layoffs in the industry. However, the Kelowna market is not directly tied to oil and gas. In fact, Albertans only represent around 10% to 15% of our total sales, and not all of them are in oil and gas.

Let's say 50% of Albertan spending was cut off in 2015. That would only affect our market, in terms of total sales, by about 5%. While that is potentially significant, there is actually a counterbalancing effect with what low oil prices will do to our economy. For starters, we directly feel the cost of oil at the gas pump - everyday people are saving money because of lower oil prices.

Here's what we're getting at: a 10% decrease in oil prices frees up over $4 billion in other spending. When there is more cash to spend on things like restaurants and retail, it actually bolsters our economy by helping local businesses. A lower cost of oil also has a direct relationship with the Canadian dollar. Historically, a 10% drop in oil prices corresponds to a 1% decline in our dollar against the reserve currency.

Now, 75% of our gross domestic product goes to the United States. When things are cheaper in Canada, the United State buys more. This has the effect of bolstering our economy - more exports to the United States means growth in some of our other industries, such as logging and mining. It's important to remember that folks who work in other sectors and who will benefit from lower oil prices also buy houses, so the market will remain stable.  

In short, we think falling oil prices will have a counterbalancing affect. There will be pros and cons to the cheaper prices - the resources market is struggling, but other markets will flourish because of the extra spending money consumers now have. Our predictions for this year haven't changed - we think we'll continue to see steady, sustainable growth in Kelowna.  

If you would like to further this discussion, or have any questions about the topic covered here today, please give us a call or shoot us an email. We don't profess to know it all, so your input is highly valued! 

Thanks for tuning in, and have a wonderful day!