Lower interest rates in 2023 could revitalize Canada’s housing market before the end of the year, according to some economists, even as the central bank warns the rate cut conversation is premature.
A report from Desjardins Economics released Thursday expects home sales in Canada to “reach a low in the second half of 2023 before lifting off again.”
Some provinces such as Ontario and British Columbia should see a return to higher prices next year as a result, the report argues, putting a “brake” on any improved housing affordability.
The revised market outlook points to a possible drop in the Bank of Canada’s benchmark interest rate as driving the housing sector’s resurgence, as well as strong demand from immigration and higher purchasing power from robust household savings and a tight labour market.
The Bank of Canada signalled last month it would pause further changes to its policy rate while it lets its aggressive rate hikes from the past year take effect.
The central bank’s own surveys released earlier this week show some market watchers are expecting rate cuts before the end of the year.
Governor Tiff Macklem pushed back on the idea after a speech in Quebec City on Tuesday, telling journalists: “It’s really far too early to be thinking about cutting rates.”
“We are pausing interest rate hikes to assess whether we’ve raised interest rates enough to get inflation all the way back to target,” he said Tuesday. “The question is really whether we’ve done enough. It’s not about whether we’re considering cutting interest rates.”
But Macklem also conceded that the pause in rate hikes might have a stimulating effect on the sector, as buyers and sellers who have been on the sidelines waiting for the peak of rates seize the temporary sense of clarity.
“The fact that we’ve paused may bring people back into the market. These are things we’re going to have to watch,” he said.
Housing market was ‘unsustainably hot’ during pandemic, but is now a ‘vulnerability’: Macklem
Randall Bartlett, Desjardins’ senior director of Canadian economics and one of the report’s authors, tells Global News that the expected pause in rate hikes is already driving down some mortgage rates, opening the door for some prospective buyers.
When markets anticipate future cuts, that drives down longer-term bond yields, he explained in an email, which feeds into fixed-rate mortgage products.
Desjardins expects five-year fixed-rate mortgages on offer to continue to drop as the Bank of Canada maintains its key rate, with variable-rate products following suit if and when cuts eventually begin.
“Falling borrowing costs should be a major driver of the (housing market) rebound,” the Desjardins report says.
How much further does the housing correction have to go?
The Desjardins report notes the housing correction has already been pronounced: existing home sales are down 38 per cent from the peak roughly a year ago, with the average sale price down 20 per cent from the market’s latest highs.
There’s still further to go, the report’s authors argue, as high interest rates will “continue to weigh on housing market activity.”
“As such, there is likely more pain ahead for Canadians, including a recession in 2023,” the report states.
For the Bank of Canada’s part, it said in a revised outlook last month that the housing market is expected to continue cooling through to mid-2023 before rebounding slightly.
Royal Bank of Canada’s assistant chief economist Robert Hogue, meanwhile, said in a note Tuesday that Canada’s housing correction appears to be “broadly easing.”
He said he expects the housing market to bottom out around the spring or summer, with the timing varying from market to market.
“The recovery that will follow, however, is poised to be very gradual at first,” he wrote. “We expect the massive increase in interest rates will continue to hold back activity and compress purchasing budgets for some time.”
What could housing look like across Canada this year?
The Desjardins report also expects the housing correction and subsequent rebound will vary by province.
The report puts Ontario and B.C. in similar boats, classified as the “most vulnerable” to further corrections in their housing markets in 2023.
Ontario, for instance, is expected to finish 2023 with home prices down 25 per cent from their peak, with housing activity returning to pre-pandemic levels by the end of next year.
But the two provinces’ reputations as attractive hubs for immigration will “underpin” the recovery for their respective sectors, the report argues.
Quebec is meanwhile expected to see a further 20 per cent decline in home sales before hitting a 10-year low, the report projects, before starting a gradual climb back up in 2024.
While Desjardins’ economists remark that the Maritime housing markets have shown some resiliency in the correction with little price decline through 2022, there might be early signs of a downturn heading as the pandemic-related migration boom starts to wane.
Strong commodity activity and prices are expected to boost economic output in the Prairie provinces, per the report, and the housing market should get a lift accordingly.
The relative affordability of Calgary, Edmonton and Winnipeg will make each city an attractive destination for immigration as well, Desjardins’ economists argue.
VANCOUVER – Contract negotiations resume today in Vancouver in a labour dispute that has paralyzed container cargo shipping at British Columbia’s ports since Monday.
The BC Maritime Employers Association and International Longshore and Warehouse Union Local 514 are scheduled to meet for the next three days in mediated talks to try to break a deadlock in negotiations.
The union, which represents more than 700 longshore supervisors at ports, including Vancouver, Prince Rupert and Nanaimo, has been without a contract since March last year.
The latest talks come after employers locked out workers in response to what it said was “strike activity” by union members.
The start of the lockout was then followed by several days of no engagement between the two parties, prompting federal Labour Minister Steven MacKinnon to speak with leaders on both sides, asking them to restart talks.
MacKinnon had said that the talks were “progressing at an insufficient pace, indicating a concerning absence of urgency from the parties involved” — a sentiment echoed by several business groups across Canada.
In a joint letter, more than 100 organizations, including the Canadian Chamber of Commerce, Business Council of Canada and associations representing industries from automotive and fertilizer to retail and mining, urged the government to do whatever it takes to end the work stoppage.
“While we acknowledge efforts to continue with mediation, parties have not been able to come to a negotiated agreement,” the letter says. “So, the federal government must take decisive action, using every tool at its disposal to resolve this dispute and limit the damage caused by this disruption.
“We simply cannot afford to once again put Canadian businesses at risk, which in turn puts Canadian livelihoods at risk.”
In the meantime, the union says it has filed a complaint to the Canada Industrial Relations Board against the employers, alleging the association threatened to pull existing conditions out of the last contract in direct contact with its members.
“The BCMEA is trying to undermine the union by attempting to turn members against its democratically elected leadership and bargaining committee — despite the fact that the BCMEA knows full well we received a 96 per cent mandate to take job action if needed,” union president Frank Morena said in a statement.
The employers have responded by calling the complaint “another meritless claim,” adding the final offer to the union that includes a 19.2 per cent wage increase over a four-year term remains on the table.
“The final offer has been on the table for over a week and represents a fair and balanced proposal for employees, and if accepted would end this dispute,” the employers’ statement says. “The offer does not require any concessions from the union.”
The union says the offer does not address the key issue of staffing requirement at the terminals as the port introduces more automation to cargo loading and unloading, which could potentially require fewer workers to operate than older systems.
The Port of Vancouver is the largest in Canada and has seen a number of labour disruptions, including two instances involving the rail and grain storage sectors earlier this year.
A 13-day strike by another group of workers at the port last year resulted in the disruption of a significant amount of shipping and trade.
This report by The Canadian Press was first published Nov. 9, 2024.
The Royal Canadian Legion says a new partnership with e-commerce giant Amazon is helping boost its veterans’ fund, and will hopefully expand its donor base in the digital world.
Since the Oct. 25 launch of its Amazon.ca storefront, the legion says it has received nearly 10,000 orders for poppies.
Online shoppers can order lapel poppies on Amazon in exchange for donations or buy items such as “We Remember” lawn signs, Remembrance Day pins and other accessories, with all proceeds going to the legion’s Poppy Trust Fund for Canadian veterans and their families.
Nujma Bond, the legion’s national spokesperson, said the organization sees this move as keeping up with modern purchasing habits.
“As the world around us evolves we have been looking at different ways to distribute poppies and to make it easier for people to access them,” she said in an interview.
“This is definitely a way to reach a wider number of Canadians of all ages. And certainly younger Canadians are much more active on the web, on social media in general, so we’re also engaging in that way.”
Al Plume, a member of a legion branch in Trenton, Ont., said the online store can also help with outreach to veterans who are far from home.
“For veterans that are overseas and are away, (or) can’t get to a store they can order them online, it’s Amazon.” Plume said.
Plume spent 35 years in the military with the Royal Engineers, and retired eight years ago. He said making sure veterans are looked after is his passion.
“I’ve seen the struggles that our veterans have had with Veterans Affairs … and that’s why I got involved, with making sure that the people get to them and help the veterans with their paperwork.”
But the message about the Amazon storefront didn’t appear to reach all of the legion’s locations, with volunteers at Branch 179 on Vancouver’s Commercial Drive saying they hadn’t heard about the online push.
Holly Paddon, the branch’s poppy campaign co-ordinator and bartender, said the Amazon partnership never came up in meetings with other legion volunteers and officials.
“I work at the legion, I work with the Vancouver poppy office and I go to the meetings for the Vancouver poppy campaign — which includes all the legions in Vancouver — and not once has this been mentioned,” she said.
Paddon said the initiative is a great idea, but she would like to have known more about it.
The legion also sells a larger collection of items at poppystore.ca.
This report by The Canadian Press was first published Nov. 9, 2024.
