The Bibby Group | June 2024 Newsletter

June 10, 2024

The Bank of Canada just cut its benchmark interest rate by a quarter percentage point to 4.75%, lowering borrowing costs for the first time in four years and marking a turning point for the Canadian economy. The latest data have shown that inflation continues to stabilize, with BoC Governor Tiff Macklem noting that “monetary policy no longer needs to be as restrictive.” For months, I’ve fielded questions about what this highly anticipated move will do. The answer: not much in the short term, unfortunately. In fact, it may increase supply levels slightly, as some sellers seeking immediate relief may assume now is the right time to list. The impact of this rate cut will be more psychological, one that potentially kickstarts a cycle in the coming quarters—which could offer additional relief if inflation continues to ease. The decisions for further cuts, however, will be taken one meeting at a time.

From a real estate perspective, let’s address the more critical issue at the moment, which is supply. In the condominium market, inventory in our central marketplace is up year over year by an astonishing 101%. Transactions, meanwhile, are down 27% over the same period. If we look at more recent data, we had two strong months in March and April; however, in May—which has felt noticeably slower—condominium supply increased 20% in one month, while transactions and prices remained flat over that period. At the moment, there is a significant amount of inventory to digest. Due to the lacklustre performance of our marketplace in recent years, the investor segment has gone into hibernation, with many investors heading for the exits.

The strongest sector at the moment appears to be the mid-range single-family market, with the most recent data showing that semi-detached home sales are up 13% year over year. This is a sign that young professional families likely exiting the condominium market for more space will transact when needed. Prices year over year are up slightly (1%), which is encouraging. The detached marketplace (generally larger, more expensive homes) is working through a surplus of supply at the moment, as year over year, the number of homes actively listed is up by 52%, while prices are down during the same period by 9%. As I mentioned at the outset, this rate cut will not improve market conditions in the short term. But it has attracted people’s attention and triggered a discussion on where we are headed, which is a good start. I look forward to tracking developments over the coming month.

All My Best,
Christopher Bibby