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Ritch's Real Estate News
News and Views on the Local Real Estate Market
Will the Price of Oil affect My House Price?
Tuesday, 03 February 2015, 03:39:02 PM

February started with a bang for those of us in Southern Ontario!.

Most of Southern Ontario was hit by the heaviest snowfall of the 2014/2015 winter season so far. 15 - 20 cm of the white stuff fell overnight on the 1 st of February with the greatest impact felt on Monday Feb 2nd.

So what happened with the Groundhog Day prediction for spring? Punxsutawny Phil, Wiarton Willie or whoever you turn to for such predictions, clearly were not seeing any shadows in the midst of a snowstorm so bring on that spring. 

Now if you are interested in a more logical approach to predictions, and are curious about the impact of these current deflated oil costs on your largest asset...those four walls and roof you live in...have a read of the following comments.

Listening this morning to Phil Soper, CEO of Royal LePage Real Estate Services, the impact of the deflated oil price will be regional across the country. Clearly for those living in Alberta, belt tightening and cost control will be the new reality until the cost per barrel gets back up to more historical numbers. And with these measures, almost always there will be job losses, lower wages and ultimately less cash and less demand for housing in that market.

The same will be true for other provinces where Oil exportation, and energy related goods and services represent a significant overall portion of the provincial economy. Newfoundland, Saskatchewan, and Alberta will likely see negative impacts on house values as long as the price per barrel of oil remains so low. 

Ontario and Quebec will likely see an opposite impact. We are oil consumers not producers. Just fill your tank today and compare it to what you paid in July of last year, and you can see on a small scale the benefit to lower oil costs to people in Ontario and Quebec. This is exponentially true for companies who manufacture goods in central Canada for export to America and beyond.

Our federal Government will certainly report lower revenues as a result of lower fuel prices as their taxes on gas and other fuels is calculated as a percentage of the total price, not as a fixed price per litre, and lower costs at the pump reflect lower taxes going back into the government coffers. 

Recently due to concerns about missing tax revenues, and overall concern about keeping our economy moving ahead,  the federal government lowered the lending rate set for the nation's banks to use as the key factor for setting mortgages. While this is just now filtering it's way into our mortgage rates, lower rates mean cheaper borrowing costs which have an inflationary affect on house prices. Another important metric to consider is the current exchange rate for our dollar vs most importantly the US counterpart. Goods and Services sold to our largest trading partner, the US, are now significantly more attractive due to the cost of our currency. This will likely mean more (higher paying) jobs in the province, increased production and stronger confidence in the local economy. Combine that with lower energy costs, (one of the long term detractors of local investment) and Ontario and Quebec appear poised to see economic growth and home price escalation in the near term.

 Your home may be your single largest asset, if not, certainly it is one of them. Each year if you pay an adviser to help you with your investments, you are given annual (or often quarterly) reports on your investment portfolio's performance. When was the last time you had a report on the performance of your largest (or one of them at least) investment? Call me today and I will be happy to give you a detailed understanding of what the value of your home is.





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