Bank of Canada Rate Cut Implications for Housing and Commercial Real Estate
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The Bank of Canada reports that while the Canadian economy has shown some growth, it remains below long-term potential, with weaknesses in household consumption and the housing market, and a softening labour market. Although growth is expected to increase later this year and into 2025, excess supply will likely continue to suppress inflation.
The recent rate cut may encourage sidelined buyers to return to the housing market. Lower mortgage qualification thresholds and increased inventory in major markets could lead to a slight boost in activity in the short term and more robust buyer demand in the fall, giving buyers more options and confidence to re-enter the market.
However, home sales did not rebound as expected after the June rate cut, with national sales down 10.9 per cent from May to June. The Canadian Real Estate Association adjusted its annual housing market forecast to 6.2 per cent growth from the original 10.5 per cent. Concerns about home prices, interest rates, and economic uncertainty remain significant barriers. Christopher Alexander, president of Re/Max Canada, suggests further rate reductions may be necessary for a more active housing market. Meanwhile, Mark Fieder from Avison Young views the rate drop positively for commercial real estate, expecting improved return metrics and increased investor appetite.
Read the full article on: REAL ESTATE MAGAZINE
