SHAWN LACKIE The Standard
Much has been made about the interest rate increases over the last five years. Ten times, the Bank of Canada (BOC) said you need to pay more. They have been battling the inflation rate and seem determined to bring it down closer to 2%. That hasn’t been an easy task. Gas prices and food prices have been onerous to the consumers so it hasn’t been an easy ride. Add in the fact housing prices went nuts in the last five years (Really?), and you have the makings of a mini-recession. But the BOC has been steadfast and not allowed things to get too crazy. So now we find ourselves in a situation which needs direction.
Expectations are the BOC will drop rates at least two more times before the end of the year. But where does that leave the consumers? Sellers have been sitting on the sideline waiting for buyers to start getting ramped up. It hasn’t happened. Buyers are even more on the sidelines for a few reasons. The deluge of crazy sales over the last few years has left many buyers very wary of getting sucked into the multi-offer vortex. And rightfully so. So they sit and wait to see what the landscape will look like over the next few years. Which, obviously, frustrates sellers. They will have to bide their time.
According to Stats Canada, the Consumer Price Index slowed to 2.5% in July. Specifically, prices for travel tours decreased by 2.8% year-over-year, while passenger vehicle prices fell by 1.4%. Shelter costs, a significant component of the CPI, experienced their slowest increase in 17 months, rising by 5.7% compared to 6.2% in June. This moderation in shelter costs was driven by a slowdown in rent inflation, which eased to 8.5% year-over-year from 8.8%, and a reduction in mortgage interest costs, which increased by 21% year-over-year, down from 22.3% in the previous month. The ongoing drop in inflation fits well with what the Bank of Canada has been predicting and boosts the chances of another rate cut. Many analysts expect the central bank to lower its key interest rate by 0.25% at its upcoming meeting on September 4th.
For the Real Estate industry, this can only be good news. If they have another rate drop by year-end, after this one, it should stimulate the business and get both the buyers and sellers back on track. Only time will tell.
Comments