Rate cut won’t boost real estate activity
A cut to the overnight rate usually delivers easier credit, helping to boost demand. This isn’t one of those times
TODAY, THE BANK of Canada confirmed what economists widely expected: a second consecutive interest rate cut, lowering its policy rate to 4.5 per cent from 4.75 per cent.
Recent reduced inflationary pressure, combined with mounting concerns about a sputtering economy and recession, suggest the central bank is responding to weakening conditions. Canadian households and businesses are struggling with restrictive borrowing costs. Consumers have pulled back on spending, unemployment is rising and businesses are pessimistic about future sales and reluctant to invest. Most macroeconomic indicators show the Canadian economy in a slump, paving the way for a continued easing cycle through the back half of the year.
For its part, the local real estate market is glacially slow at the moment, and while the rate cut is welcome, it is unlikely to cause a change in the market. The reason is inventory.
For two years now, as we’ve digested the real estate bubble we created, we’ve watched the market find its new “average”
Given tepid demand for housing, many more houses list every day than sell, causing inventory to continue to grow. There are sellers on the sidelines impatiently waiting for any turn in the market to bring their properties back online. All this suggests any small increase in buyer activity will likely be matched by an avalanche of new listings.
This market slowing is not unprecedented ― though it might seem like it if you are new to watching and depending on the real estate market (which most of us are). For decades prior to 2017, real estate in the London region was a slow and steady grind of annual percentage price changes you could count on one hand. Covid gave us the new game of watching Realtor.ca nightly for the high-risk real estate news of the day. But for two years now, as we’ve digested the real estate bubble we created, we’ve watched the market find its new “average”.
We should all appreciate that if the bank rate continues to fall over the next year in a Canadian “measured” fashion, it likely means our economy is struggling, jobs are no longer as plentiful and economic security is increasingly at risk. Housing will be slightly more affordable, but we’ll be paying a price in other sectors. We can only hope our leaders create a soft landing for us after they’ve tackled the inflationary stress we’ve endured for the last few years.
Market analysis provided by Marcus Plowright, Sales Representative, A Team London. Marcus can be reached at 519-872-8326 or [email protected].
High- and low-priced real estate listings around town this week
London East
Low
Address: 695 Victoria Street
MLS number: X8381756
List price: $359,900
Days on market: 61
Size: 0 bedroom, 1 bathroom, 1162 square feet
Listing agent: Lawangeen Khan, Salesperson, Initia Real Estate (Ontario) Ltd.
High
Address: 1745 Kilally Road
MLS number: X8337350
List price: $2,499,900
Days on market: 67
Size: 3 bedrooms, 4 bathrooms, 3,500-5,000 square feet
Listing agent: James Smith, Sales Representative, Sutton Group – Select Realty
London North
Low
Address: 147 Wilson Avenue
MLS number: X8380834
List price: $439,900
Days on market: 80
Size: 3 bedroom, 2 bathroom, 1,410 square feet
Listing agent: Sally Jia, Salesperson, Initia Real estate (Ontario) Ltd.
High
Address: 1597 Gloucester Road
MLS number: 40592875
List price: $4,250,000
Days on market: 49
Size: 5 bedrooms, 5 bathrooms, 6,701 square feet
Listing agent: Kim Mullan, Broker Sutton Group – Select Realty Inc.
London South & West
Low
Address: 84 Langarth Street West
MLS number: X9033016
List price: $399,000
Days on market: 9
Size: 3 bedroom, 1 bathroom
Listing agent: Vick Khullar, Broker, Royal Lepage Flower City Realty
High
Address: 1845 Woodhull Road
MLS number: X8411436
List price: $3,250000
Days on market: 46
Size: 4 bedrooms, 5 bathrooms, 5000-plus square feet
Listing agent: Raeanne Muir, Broker, Century 21 First Canadian Corp.
Disclaimer: London Inc. does not guarantee the accuracy of the statistical data on this page. The data does not represent the listings of any one agent or agency but represents the activity of the real estate community in the area. Any real estate agent’s ad appearing is separate from the statistical data provided, which is in no way a part of their advertisement.