Taliban, Afghanistan and Oil Prices: The impact on our market

Taliban, Afghanistan and Oil Prices: The impact on our market

The tumultuous real estate market may be stabilising, especially for first-time buyers and those searching for a modest home.

What’s going on with Canada’ oil prices, and some key events abroad; the Taliban’s impact on Afghanistan’s economy could cause ripples felt throughout most of the world.

At the moment, inventory remains low countrywide, down 33.5 percent in July compared to the previous year. However, the reduction is less than the 43.1 percent loss in June, new listings are up 6.5 percent countrywide compared to the same month last year, and the inventory coming on the market might be good news for buyers seeking for a low-cost home: According to the data, smaller residences are gradually obtaining a bigger part of the inventory.

We think one of the biggest things to keep in mind is how when oil prices are rising along with other commodities, the Calgary real estate market gets a boost. Real estate prices in Calgary have just begun to rise, although they are still lagging behind national price increases. Historically, the area has underperformed when oil prices have been low. Home prices are expected to rise now that crude is at an all-time high, according to the economist, at least on a relative basis.

The share of houses for sale between 750 and 1,750 square feet in July 2021 jumped to 36.3% in July. The inventory of homes between 3,000 and 6,000 square feet dropped to 20.1%, down from 24.2% in 2020. Overall, this means a rosier outlook for homebuyers.

Taliban, Afghanistan, Oil Prices, and it’s impact on our market.

Real estate values in Calgary have typically risen and fallen in lockstep with oil prices, which makes sense. Although it is a huge metropolis, the oil sector is one of the most important economic drivers in the area. During the 2010 oil price boom, as well as the one in the early 1980s, home values skyrocketed. Oil prices are rising again, but housing values in Calgary are lagging behind the rest of the country, and the fate of housing prices in the medium term could depend heavily on one major factor.

In May, the MLS home price index (HPI) in Calgary increased by 11% year over year. It's a lot of growth in a regular time, but not so much in the middle of a boom. Over the same time period, national house prices climbed by 23%. Even with the current surge in oil prices, Calgary's prices have yet to rise. What might make or break the trends in current investors, however, is the situation in Afghanistan  

Experts think Afghanistan's political unrest might have an impact on global crude oil prices. Iran, along with other nations like Saudi Arabia and the United Arab Emirates, is a significant oil producer in the globe. Oil prices might rise if the Taliban return to their former methods and provide sanctuaries for Islamic extremists from the hydrocarbon-rich Middle East, North Africa, and Central Asia, according to energy analyst Narendra Taneja.

Tensions in the "Middle East have the potential to raise prices," according to Barrons, a Dow Jones & Company newspaper. It was highlighted that JP Morgan had previously projected that growing demand and tight supply would push oil prices to $80 per barrel. Increases in global petroleum prices have a direct impact on India's economy, especially as the nation imports more than 80% of its total crude needs.

Reduced competition and lower pricing despite a potential rebound in pricing

Regardless of what happens with oil prices in the coming weeks, there have been some other shorter term changes to the market. People no longer cite bidding wars as the main reason they weren't able to get the home they wanted, for the first time since 2018. Homes are spending slightly longer on the market — 16 days on average — than a few months ago. The National Association of Home Builders released its annual Housing Trends Report this week.

Sellers are have also started dropping their prices, with the share of listings that had price drops in July rising to 4.7%, the highest percentage since 2019, according to Redfin. Mortgage applications dropped 1.7% week-over-week during the week ending July 30, hitting their lowest level since May 2020.

In the United States, gasoline and fuel costs have already surpassed all-time highs. Meanwhile, in order to reduce its dependency on a few exporting nations, India has attempted to diversify its oil-importing markets. The United States and Nigeria, for example, have emerged as major oil suppliers to India. Now is a good time to pay attention to world affairs before planning out any long term investment strategies, and we would advise that coming fluctuations on oil prices might be one of the biggest driving forces in the coming weeks.