No, Canada’s half-point interest rate cut won’t ignite London-area home sales

Article content

Wednesday’s supersized interest rate cut by the Bank of Canada may finally pull some buyers and sellers back into London’s housing market, but don’t expect the latest drop to heat it up much just yet, industry watchers say.

Canada’s central bank brought its key policy rate down by half a percentage point to 3.75 per cent on Wednesday after Canada’s inflation rate fell to 1.6 per cent in September.

Article content

Wednesday’s move marked the fourth consecutive rate cut since June by the Bank of Canada, which governor Tiff Macklem said has shifted its focus from lowering inflation to maintaining it around its target of two per cent.

“We took a bigger step today because inflation is now back to the two per cent target and we want to keep it close to the target,” he said.

Though the larger cut – all previous reductions were of 0.25 percentage points – may encourage some buyers to leave the sidelines, affordability may remain a hurdle for many, said Jeff Nethercott, a broker with Royal LePage Triland Realty in London.

“I do believe we’re going to see some pickup in activity for people who have been waiting for positive news,” he said “However, going through the seasonality of the market, we may not see the full effects until the new year.

“We might start to see an increase in entry-level activity with first-time buyers entering the market, but it will take a little bit of time to trickle up through higher-priced homes.”

Victor Tran, an analyst with Ratesdotca, shared similar opinions, saying many would-be buyers likely will wait for the Bank of Canada’s final rate announcement of the year in December before making a move because they are worried the market hasn’t yet bottomed out.

Article content

Article content

“It’s good news overall, but I don’t think it’s going to suddenly increase demand as much as what people think,” he said.

“We’re definitely in a downward trend right now and it seems like the Bank of Canada will continue to drop rates, but because house prices are still so high, it just doesn’t make sense for a lot of people to enter the housing market.”

Before the Bank of Canada began raising interest rates in early 2022, London was among the hottest markets in the country.

And while much of the blame for the slowdown in home sales and drop in prices was placed on higher borrowing costs, this year’s reductions have done little to reverse the trend.

A total of 562 homes sold in September, which was a six per cent improvement over last year’s lackluster performance, but not better than in 2022.

Though the impact of Wednesday’s announcement may not be felt immediately, it could extend the fall home selling market by a few weeks, Nethercott said.

“Things generally start to quiet down as we get closer to that holiday season and winter moves in,” he said. “However, there’s been so much pent-up demand of buyers and people looking to move in the market for the last couple of years that we may not see as low as seasonality adjustment as we have in the past.”

Article content

Nethercott also said he doesn’t expect London’s housing market, which during the past year has stayed in balanced territory but trending in favour of buyers, to suddenly become a seller’s market.

He noted the London region has increased its inventory significantly and more homes could be hitting the market soon.

“We’ve been experiencing both buyers and homeowners who have been holding off on the market for better opportunities,” Nethercott said.

“For sellers, if they start to see more buyers entering the market and houses turning over quicker, it may encourage more sellers to come in the market, keeping us in a fairly balanced market.”

jjuha@postmedia.com

With Canadian Press files

Article content