Where Are Housing Prices, Interest Rates, and the Economy Headed? Insights from Scotiabank’s Chief Economist

If you’re like most Canadians, you’re feeling the impact of fluctuating interest rates, housing prices, and an economy that’s been anything but predictable. Scotiabank’s Chief Economist, Jean-François Perrault, recently shared his thoughts on these critical topics and offered insights into where we might be heading. Here’s what he had to say—and what it could mean for all of us.

The Interest Rate Rollercoaster: Are More Cuts Coming?

The Bank of Canada has already slashed interest rates to counter slow inflation, but is more easing on the horizon? According to Perrault, there’s a less-than-even chance of another deep cut. The recent adjustments were primarily to tackle slower inflation rather than a dire need to stimulate economic growth. Although rate cuts can provide some relief, they aren’t the cure-all, especially if inflation remains low but steady.

In Perrault’s view, rate cuts are more likely to happen if economic activity starts to dip unexpectedly. For now, though, he’s not forecasting drastic measures; he believes that the current rates are generally aligned with Canada’s modest economic recovery.

Housing Prices: What’s the Real Outlook?

Housing prices have been top of mind for many, especially with how volatile they’ve been in recent years. Perrault acknowledges that high interest rates have cooled the market, but he doesn’t foresee any major crashes. Instead, he expects a more balanced market as we move forward. He suggests that while we may not see another explosion of housing price growth, neither should we brace for a steep drop.

His message? Moderate growth is likely, but it’s still a tough market for first-time buyers. Many potential buyers are waiting to see if interest rates will ease further before jumping in, which has kept demand somewhat in check. This pause could maintain stability in prices, though Perrault also notes that local variations—like in Toronto and Vancouver—will likely continue as supply and demand fluctuate.

The Broader Economic Picture: Stability or More Turbulence?

On the bigger picture, Perrault believes Canada’s economy is positioned to recover gradually. He predicts modest GDP growth, between 1.3% and 2.1%, and expects inflation to remain close to the Bank of Canada’s 2% target. It’s a cautiously optimistic outlook, with the potential for steady, if unspectacular, growth.

One significant factor is Canada’s low unemployment rate, which suggests underlying resilience in the economy. While growth is slow, low unemployment can support stable consumer spending, which is essential for economic health. Perrault argues that while we might not see rapid growth, the combination of steady employment and gradual inflation control bodes well for stability.

What Does This Mean for Canadians?

For Canadians, the takeaway is to plan for a relatively stable, if slow-growing, economic landscape. Homebuyers might not see dramatic changes in prices or rates, but there could be smaller adjustments, especially if inflation nudges the Bank of Canada to reconsider rate changes. For those looking to make significant financial decisions, caution and careful planning remain key.

Perrault’s insights reflect a sense of patience—he suggests that both the housing market and the economy are likely to settle into a more predictable, if slower, pattern. For now, he sees no signs of imminent recession, which is reassuring news for those bracing for the unexpected. Instead, the outlook for Canada’s economy, interest rates, and housing market is one of cautious optimism and steady adaptation.

In short, if you’re navigating this market as a buyer, seller, or simply a concerned Canadian, Perrault’s insights offer a grounded perspective: stay aware, but don’t expect massive upheavals.

Bank of Canada’s Big Rate Cut: What It Means for Vancouver’s Housing Market


The Bank of Canada recently announced a significant rate cut of 50 basis points, or half a percent, marking a major shift in the country’s interest rate environment. This “jumbo cut” has lowered borrowing costs substantially, prompting questions about what may lie ahead for the Vancouver real estate market.

While it’s easy to speculate on the future, my approach is to base predictions on past data, providing a more solid foundation than simply guessing. Here’s an overview of what happened the last time the Bank of Canada made a similar rate cut, followed by practical advice on what to consider if you’re thinking about entering the market now.

Historical Insight: The 2009 Rate Cut

The last major cut of this magnitude occurred in March 2009, during the global financial crisis. At that time, Canada’s economy felt the shockwaves of the U.S. housing market crash, with impacts in Vancouver’s housing market as well.

  • February 2009: Before the rate cut, interest rates were set at 1%, and market activity was already on the rise. Total sales in Greater Vancouver stood at 1,480—a 94% increase over January.
  • March 2009: Following the cut to 0.5%, sales jumped to 2,269 units, indicating a quick response to the lowered rates.
  • April–June 2009: Activity continued to surge, with April sales reaching 4,649 and remaining robust into the summer months.

However, the rising sales volume didn’t immediately translate into price increases. It wasn’t until May 2009 to May 2010 that prices began climbing significantly, illustrating a lag between rate cuts and price growth.

What This Means for Today’s Market

While there are clear similarities between 2009 and today, there are also some critical differences. Current interest rates are still much higher than they were in 2009, and we’re entering a seasonally slow period for real estate. Typically, activity tapers off in December and January, so the Bank of Canada’s rate cut may not drive a quick market surge.

Nonetheless, this cut signals the start of a potential trend, with more rate reductions anticipated over the next year. This forecast, supported by various economic reports, suggests that lower interest rates could boost the real estate market as we move into 2025.

Questions to Consider if You’re Thinking About Buying or Selling

If you’re on the fence about entering the market, here are some points to reflect on:

  1. Has the Market Bottomed Out? – Trying to “time” the market is notoriously difficult, but examining past patterns may give you an edge. Do you believe prices have reached their lowest, or do you expect further drops? Consider factors like ongoing rate cuts, immigration rates, and inventory levels.
  2. Is Now the Right Time to Buy? – With rates potentially declining further, purchasing now could lock in favorable financing options, but keep in mind that the market could still shift depending on broader economic conditions.
  3. Are You Prepared for Market Changes? – If you’re a seller, spring 2025 might see a busier market as buyers re-enter due to lower rates, potentially driving prices up. If you can afford to wait, holding off until rates stabilize further may be beneficial.

Key Takeaways for Vancouver’s Market

Lower rates tend to stimulate activity, but the pace of change varies. Sales volume might increase before prices do, as we saw in 2009. This means that if you’re aiming to purchase at a lower price, acting sooner could work in your favor before prices potentially climb. However, if your goal is to sell, waiting for rates to stabilize or drop further could lead to better offers.

For more specific guidance, consider consulting economic forecasts or staying tuned to market updates. And if you’re a first-time home buyer unsure about the process, I’ve prepared a free guide to help you understand the steps to buy in Greater Vancouver.

If you’d like tailored advice, don’t hesitate to reach out. As a Vancouver real estate agent, I’m here to help you make informed decisions in a changing market.

Rent Prices in Vancouver Plummet. Here is why!

At the beginning of this year, the federal government introduced a cap on international student permits, aiming to relieve pressure on housing and other essential services. This policy appears to be making an impact. According to a recent report by Rentals.ca and Urbanation, Canada has seen its slowest annual rent growth since October 2021.

The report, published on Wednesday, revealed that the average asking rent for all types of residential properties in Canada reached $2,193 in September, reflecting a modest 2.1% increase year-over-year. By comparison, in August, the annual rent growth was higher at 3.3%.

September marked the fifth consecutive month (since May) where the rate of rent inflation has slowed. However, the report also noted that average asking rents were still 13.4% higher than two years ago and a significant 25.2% higher than three years ago during the COVID-19 pandemic.

Shaun Hildebrand, President of Urbanation, pointed out that international student enrollments have dropped by about 50% from their peak levels, with the most pronounced effects in Ontario and British Columbia (BC).

In Ontario, rents saw the largest year-over-year decline in September, dropping 4.3% to an average of $2,380. Similarly, in BC, rents fell 3.2% annually, landing at $2,570. Despite these declines, BC still had the highest average rent among Canadian provinces.

The report further highlighted that rent decreases in Ontario and BC were observed across all unit types. One-bedroom apartments in BC saw the largest drop, down 4.9% to $2,273, while two-bedroom units in Ontario fell by the same percentage, settling at $2,619.

The report also provided a closer look at Canada’s largest municipal rental markets, where average asking rents have dropped year-over-year. In Vancouver, rents fell for the tenth straight month in September, with a notable 9.5% decline. In Toronto, rents decreased for the eighth consecutive month, down 8.1%. In Toronto, the average apartment rent reached a 25-month low of $2,668, while Vancouver still had the country’s highest apartment rent, averaging $3,023.

For specific unit types, one-bedroom apartments saw the largest rent declines in both Vancouver and Toronto, with decreases of 11.4% and 7.8%, respectively, bringing prices down to $2,673 and $2,418. On the other hand, three-bedroom apartment rents performed the best across Canada’s six largest markets in September.

 

Cautious Buyers Mark the Start of Fall Market – October 2024 Update

VANCOUVER, BC – October 2, 2024 – Home sales in Metro Vancouver saw a slight year-over-year decline in September, with a 3.8% decrease, indicating that recent reductions in borrowing costs have yet to significantly stimulate demand.

According to Greater Vancouver REALTORS® (GVR), residential sales totaled 1,852 in September 2024, down from 1,926 in September 2023. This figure is also 26% below the 10-year seasonal average of 2,502.

“Many in the real estate sector have been looking for signs that lower mortgage rates are reigniting demand, but the data from September isn’t showing the surge they hoped for,” said Andrew Lis, GVR’s director of economics and data analytics. “Sales continue to trend about 25% below the 10-year seasonal average, which has been the case for several years. While sales are slightly behind our projections, we remain hopeful 2024 will still outperform 2023.”

In September 2024, there were 6,144 new listings for detached, attached, and apartment properties on the Multiple Listing Service® (MLS®) in Metro Vancouver, reflecting a 12.8% increase compared to the 5,446 listings in September 2023 and a 16.7% increase above the 10-year seasonal average.

The total number of homes listed for sale in Metro Vancouver reached 14,932 in September 2024, a 31.2% increase from 11,382 the previous year, and 24.2% above the 10-year average of 12,027.

The sales-to-active listings ratio across all property types in September was 12.8%, broken down as 9.1% for detached homes, 16.9% for attached properties, and 14.6% for apartments. Historical data indicates that when this ratio falls below 12% for a prolonged period, prices face downward pressure, while a sustained ratio above 20% can lead to upward pressure on prices.

“With some buyers hesitant, inventory levels have remained high, offering more choices for those still in the market,” Lis explained. “However, with increased options, prices have stayed relatively stable over the past few months. September has now shown small declines across all segments, primarily because sales haven’t kept up with new listings, pushing the market closer to a buyer’s market. With two more policy rate decisions expected this year, and potential further reductions, demand could pick up if buyers re-enter the market later this fall.”

The MLS® Home Price Index benchmark for all residential properties in Metro Vancouver is currently $1,179,700, representing a 1.8% decrease from September 2023 and a 1.4% decrease from August 2024.

Detached home sales in September 2024 reached 516, a 9.8% decrease from the 572 sales in September 2023. The benchmark price for a detached home stands at $2,022,200, a 0.5% increase from last year but down 1.3% from August 2024.

Apartment sales totaled 940 in September, down 4.9% from 988 the previous year. The benchmark price for an apartment is now $762,000, a 0.8% decrease from both September 2023 and August 2024.

Attached home sales saw a positive trend, reaching 378 in September 2024, a 7.4% increase compared to 352 sales in September 2023. The benchmark price for townhouses stands at $1,099,200, a 0.5% increase from last year.

A Massive Interest Rate Cut is Coming in October 2024?

Canada’s Economic Outlook: Interest Rate Cuts and Modest Growth Ahead

The debate continues over the direction of Canada’s economy, as the Bank of Canada (BoC) faces critical decisions on interest rates. With recent gross domestic product (GDP) data showing mixed results, economists and financial markets remain divided on whether the central bank will opt for a 25 or 50 basis point rate cut at its next policy meeting on October 23. Meanwhile, Deloitte Canada’s fall economic outlook predicts a steady decline in interest rates over the coming years, with the BoC’s rate falling below 3% by mid-2025.

Mixed GDP Signals and Market Reactions

Canada’s GDP expanded by 0.2% in July, exceeding expectations, but preliminary data for August shows the economy stalling. As a result, third-quarter growth is now forecasted at an annualized rate of just 1%, significantly lower than the BoC’s July forecast of 2.8%. Despite this, financial markets have given a slight edge to a 50 basis point cut, with a 52.3% probability according to LSEG data, up from earlier expectations of a smaller reduction.

The U.S. economy is also playing a role, with easing inflation in the world’s largest economy creating more room for the BoC to lower its rates without putting downward pressure on the Canadian dollar. The U.S. Federal Reserve’s next meeting in November is expected to result in a rate cut, further influencing the BoC’s decision.

Economists remain split on the size of the upcoming cut, but many are leaning towards the larger 50 basis point reduction, citing weak GDP growth and rising unemployment, which currently sits at 6.6%.

Interest Rate Path and Economic Growth Projections

In line with this uncertain economic backdrop, Deloitte Canada’s forecast for the coming years suggests that the BoC will continue to lower rates to support economic growth. Deloitte predicts the key interest rate will fall to 3.75% by the end of this year, with further reductions to 2.75% by mid-2025. This 2.75% rate is seen as neutral, meaning it neither stimulates nor restrains economic activity, and is higher than the rates seen before the COVID-19 pandemic.

Dawn Desjardins, Chief Economist at Deloitte Canada, noted that while the economy has slowed due to higher borrowing costs, the country is likely to avoid a recession. “It’s hard to argue that the economy is just skating through this period of higher interest rates,” she said, but pointed out that growth persists despite these challenges. Desjardins expects economic conditions to improve next year, as more rate cuts help to stimulate demand.

Labour Market and Inflation Considerations

Canada’s labour market has shown signs of softening, particularly as homeowners begin to face the reality of higher interest payments when refinancing their mortgages. However, Deloitte remains cautiously optimistic, suggesting that the labour market is not in crisis, even though weaker job vacancy rates and hiring challenges persist.

At the same time, inflation has fallen to 2%, reaching the BoC’s target in August. With inflation seemingly under control, the BoC has shifted its focus to economic growth risks, particularly in light of weak GDP growth. Economists from various financial institutions, including BMO, Desjardins Securities, and CIBC, generally agree that more rate cuts are likely, with many favoring 50 basis point reductions in the near term.

Looking Ahead: Risks and Opportunities

While the economy has yet to fully recover from the pandemic’s effects, key factors, such as climate change, could increase inflationary pressures down the road, warns Desjardins. These structural issues are expected to embed themselves in prices and may affect future monetary policy.

For now, the central debate revolves around whether the BoC should accelerate its rate cuts in response to economic underperformance, or if it should take a more cautious approach, given ongoing uncertainties and the potential for economic resilience in sectors like housing and household spending.

In conclusion, Canada’s economic outlook for the next several quarters hinges on the central bank’s ability to navigate slowing growth and inflation risks. With interest rates likely to decline further, both the BoC and the broader financial markets will be closely watching the data to determine the best course of action to support economic recovery and stability.