October 22, 2024: "Super-Sized" Rate Cut This Week?
Is October 23, 2024, the turning point for the Canadian real estate market? Following the latest inflation numbers, the business and banking sectors are buzzing about a potential 'Jumbo' or 'Super-Sized' rate cut from the Bank of Canada this week. Will it be a 25, 50, or even 75 bps cut? Below, we share some of the local economists’ predictions ahead of the BoC decision:
- Nathan Janzen, an assistant chief economist at RBC, said that the latest inflation numbers solidifies the case for a 50 basis points rate cut.
- Carl Gomez, chief economist at real estate data company CoStar said, "What's interesting is Canada's real policy rate is still much higher than every other country, but we are dealing with a far weaker economy in Canada than the United States. So this just tells you another reason why the Bank of Canada is so far behind the curve,"
- CIBC economist Avery Shenfeld believes that it’s easier to argue for a 75 basis points rate cut as the growth is sluggish in Canada compared to our neighbours South of the border.
- Charles St-Arnaud, chief economist with credit union Alberta Central believes we're expecting two back to back 50 basis points rate cuts to finish off 2024 and another 25 basis points in January 2025.
Source: Globe & Mail, The Canadian Press
OUR TAKE
From a real estate standpoint, a 50 bps rate cut this week would likely be welcomed by many prospective buyers and investors eager to re-enter the Canadian housing market, particularly in major urban centers. While September was still relatively quiet in terms of market activity, Toronto has started showing signs of life, with sales volume up 8.5% year-over-year. However, the market still faces an excess of inventory, which needs strong catalysts to drive absorption in the coming months.
If this rate cut materializes, it could be the tipping point that brings renewed consumer confidence, helping the market gain momentum and making homes more accessible to buyers. It will be interesting to see if this announcement is enough to stimulate demand and shift the market dynamics as we move into the final quarter of the year.
Toronto Office Market Could Take 7 Years To Recover: CIBC
According to a report by Centre for Cities, Toronto is falling behind other major global cities in terms of returning to the office, with workers spending an average of 2.7 days on-site, placing the city alongside London at the bottom of the scale. This slow return to the office is having a negative impact on the Toronto office real estate market.
A separate report from CIBC Capital Markets highlights a potential link between the number of days employees spend in the office and vacancy rates. Cities like Singapore and Paris, which have the highest office attendance, also boast the lowest vacancy rates at 5% and 8%, respectively. On the other hand, cities like Sydney, London, and Toronto, which have the fewest in-office days, are seeing much higher vacancy rates—12%, 8%, and a striking 19% in Toronto.
With this ongoing trend, it’s estimated that it could take up to 7 years for the Toronto office real estate market to recover to its pre-pandemic levels.
领英推荐
Source: Financial Post
OUR TAKE
High office vacancy rates in downtown areas, such as Toronto, have significant ripple effects on the local retail micro-economy, which once thrived before the pandemic. Office workers were a major source of daily foot traffic for downtown retail stores, cafes, restaurants, and service providers. With a significant portion of workers still working remotely, businesses in the downtown core see reduced customer numbers, leading to lower sales and profitability. This decline in foot traffic, especially in high-density office areas, is stifling the growth of small businesses that relied on a consistent flow of office workers for their customer base. Further, high office vacancies reduce the demand for commercial real estate, which in turn lowers rental prices for retail spaces. While this might sound beneficial to struggling retailers, it also reflects a less dynamic economy where the demand for these spaces is weak, potentially deterring new business openings or expansions. For a full recovery, a balance between remote work and in-office presence may be essential to revitalize the local micro-economy, restore foot traffic, and attract new businesses back into the core.
ALMOST MADE THE CUT
Check out this week's "best" mortgage rates as published in the Financial Post.
We're privileged to be your source of information and understanding of what's happening within our local economy and the real estate landscape. If you have any questions or would like to chat further, please don't hesitate to reach out.