We at Robert Floris’ Mortgage Architects have monitored the oil shock situation in regards to mortgages since February. Make no mistake, this will have an effect on not only inflation but the general economy as well. In the long term, this may be great for consumers, but not so great for our Hamilton steel workers.
With oil values rebounding – albeit slowly – from last year’s oil shock, many believed the Canadian real estate market had gotten off fairly scot-free, but a new report suggests the greatest impact is yet to come.
According to the Petroleum Labour Market Information (PetroLMI), Canada stands to lose some 185,000 jobs all told linked to the oil and gas industry, a move that could cripple the market in certain centres, such as those in Alberta.
For the time being, however, many Albertans are holding off on making any real estate decisions.
“The attitude out there is very much wait-and-see,” says Duane Ritter, an agent in Edmonton. “We’re not getting a reaction; people are saying let’s see what happens with oil, let’s see what happens with the election. In the past, there would be a knee jerk reaction.”
Still, Ritter admitted that a severe drop in jobs could impact the market, further stunting sales and sending home prices down.
Alberta will, of course, take the biggest hit. PetroLMI estimates the oil-producing province will lose more than 125,000 jobs this year. But a third of the losses will take place outside of the province.
“The industry has already experienced significant impacts to its labour force since the price of oil started its decline last November,” PetroLMI director Carol Howes said in a statement. “If oil prices continue to remain low, we anticipate additional reductions to spending and jobs before things start to turn around.”
While Howes doesn’t specify the types of jobs that would be eliminated first, many are expecting senior management positions to be cut before more frontline jobs are chopped. As a result, the luxury real estate market would likely suffer in the short-term.
“Higher priced properties in the detached sector saw a noticeable decline in absorption levels city-wide, indicating there is less demand relative to supply levels,” Ann-Marie Lurie, the chief economist for the Calgary Real Estate Board, said in a market report earlier this month. “This does not come as a surprise as many of the job losses in recent months have occurred in the higher paying sectors.”
Robert Floris is an independent mortgage broker from Mortgage Architects in Hamilton, Ontario.