Interest Rates Stand Pat
If this prevailing springtime economic environment had to be summed up in just one word, most people would agree that ‘uncertain’ is an exceptionally strong contender. Trade policy is uncertain, the stock market is uncertain, the future governance of Canada is (for the moment) uncertain – and large portions of the real estate market are – wait for it – uncertain.
In its most recent move, even the Bank of Canada is demonstrating a sense of uncertainty in its approach to the country’s key policy rate. On April 16th, BoC governor Tiff Macklem announced a halt to what had been a steady pattern of rate decreases going back to last June. The bank’s decision to hold the overnight rate at 2.75% took a good number of onlookers by surprise, as yet another quarter point reduction had been widely predicted in the face of strong economic headwinds.
A Coles Notes interpretation of the announcement would chalk the bank’s stasis up to its expressed inability to issue economic forecasts with any sense of certainty, thanks in major part to the seemingly random nature of US tariffs.
Quoted in a recent piece posted by CBC News, Governor Macklem stated that:
“A lot has happened since our March decision five weeks ago, but the future is really no clearer. We still do not know what tariffs will be imposed, whether they'll be reduced or escalated and how long all of this will last… . That means being less forward-looking than usual until the situation is clearer.”
Early reaction from economists suggests that the BoC might not yet be finished with rate drops, and is poised to restart such action if the general economic circumstance deteriorates any further. In normal times, the bank’s decision to hold steady would usually be interpreted as an indication of strength – of confidence in its outlook for Canada. But, as we all are increasingly tired of hearing, these are anything but normal times.
So, how does all of this news tie back into the prospects for real estate here in Waterloo Region? What is certain, is that real estate is a dynamic environment powered most fundamentally by necessity. Families and individuals need a place to lay their heads, and there are numerous essential reasons why people are prompted to buy or sell real estate. As we alluded to in a previous post, we’re still seeing a reasonable amount of activity in the market, with a slight increase evident in our area over the past week. This is particularly true of traditionally attractive properties in top-shape for viewing. These are still being snapped up, often in multiple offer scenarios, and sale prices here are remaining stable.
But, in keeping with recent trends, one-bedroom condos continue to suffer the effects of a larger pool of inventory than we’ve seen for the better part of a decade. This is resulting in stagnancy in this corner of the market, with many owners instead turning to rent rather than list for the foreseeable future. It remains to be seen how static interest rates will impact buyer activity in the weeks to come.
The BoC’s next interest rate policy announcement is due on June 4th.
As always, if you have any questions about real estate – general or specific – you can absolutely feel free to get in touch. We’re always happy to help. Happy Easter everyone!