BoC’s rate cut triggers hope and concern in housing sector

As published on Condo Business 

By: Ross McCredie  

The Bank of Canada (BoC) cut its interest rate by 25 basis points, lowering it from 2.50% to 2.25%. This marks the central bank’s second consecutive rate cut, following the same reduction in September.

“With ongoing weakness in the economy and inflation expected to remain close to the 2% target, Governing Council decided to cut the policy rate by 25 basis points,” the bank announced on October 29. “If inflation and economic activity evolve broadly in line with the October projection, Governing Council sees the current policy rate at about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment. If the outlook changes, we are prepared to respond.”

The rate cut has stirred commentary within the real estate and homebuilding sectors, reflecting both concern and optimism about its impact on new housing and future homebuyers.

Concerns for housing industry

Leor Margulies, partner of the commercial real estate and development group, at Robins Appleby LLP., believes the central bank is underestimating the severity of the current downturn in the new home sector and is urging more decisive action.

“The BOC is finally waking up to the fact the economy is in serious trouble,” he says. “It does recognize the challenges the Canadian economy is facing, but it still seems to be soft selling the problems in not recognizing the terrible impact of the uncertainty from the tariffs on industries as a whole, and the huge downturn in the new home market in Canada.”

He points to the Greater Toronto Area’s new condo sales numbers for September. They total 155 units, representing a level that is 90 per cent below the 10-year average.

“From all accounts this real estate recession is even worse than the 90 – 95 recession which I thought could not be worse having lived and suffered throughout,” he adds. “The low-rise side in GTA and elsewhere is not substantially better.”

Margulies warns that this continued weakness underscores the urgent need for more aggressive rate cuts to help the new home market recover.

“What it has not factored in is the coming downturn in the construction industry next year when all of the existing projects are substantially done and there is nothing in the pipeline, either on the low-rise or the hi-rise side,” he predicts. “The residential construction industry is one of the top five or 6 industries in Canada and when it shuts down, as it will next year and following, the impact will be severe.”

He adds that the half-point rate cut coupled with newly announced tax breaks for first-time homebuyers could boost the market, but the BOC’s caution is holding it back.

Potential confidence booster

Meanwhile, Ross McCredie, CEO and Chairman of Sutton Group, described the cut as beneficial, although it hasn’t translated to cheaper mortgages.

“While the September inflation numbers created some uncertainty, the latest rate cut was both expected and welcome,” he says. “However, it’s important to note that the recent rate cuts haven’t significantly impacted many Canadians’ mortgage rates. That said, this move may help restore some confidence for buyers who have been waiting on the sidelines, which is particularly important given the stagnating market conditions across Canada.”

James Innis, president of Sutton Group, stated that the BoC’s fourth rate cut this year prolongs the current easing cycle, offering continued support for homeowners while balancing tariff uncertainties, affordability challenges, and inflation concerns.

“For the roughly 1.8 million Canadian households facing upcoming mortgage renewals in the next twelve months or those contemplating their first home purchase, this easing helps restore confidence and improve affordability,” he notes. “Still, as the nine cuts over the cycle have shown, monetary policy alone cannot solve Canada’s housing challenges. Meaningful progress for Canadians will depend on coordinated action from all levels of government to expand supply, support homeowners and improve affordability,”

In B.C., Appelt Properties sees significant opportunity in Metro Vancouver. Founder and President Greg Appelt remains optimistic. He says buyer uncertainty persists there and activity remains sluggish but the rate cut could prompt buyers to re-enter the market and cause a rebound. “While a single cut may not be enough, I’m hopeful it will instill some added confidence in B.C. residents navigating mortgage renewals and home buying decisions,” he says.