Let me be the bearer of good news for once: the Bank of Canada did NOT raise interest rates
today. No more hikes were expected, because we’re clearly starting to see the cracks in the economy. Unemployment is rising, house prices are dropping, GDP is down, and bigger layoffs are happening (TD announced 3,000 job cuts
recently). I’ve never been one to cheer for a recession, and I don’t think recessions are positive for commercial real estate. We may love office leasing and warehouse development, but let’s admit that real estate becomes an expense to minimize during hard times.
But to the title: is the worst over? Plenty of high-profile commentators think so. As I mentioned last week, economists at the Real Estate Forums were optimistic
about rates cuts in 2024... but then again, they said that last year, didn’t they?
What concerns me is the chart below. The US seems to have weathered the storm of high rates and continued growing. Canada is performing much worse. You can come up with many reasons for this, including that our economy is more dependent on real estate and debt. But our economy is shrinking, while having lower rates than the US... not an encouraging combination.
As widely expected, the Bank of Canada held interest rates unchanged in the face of rising unemployment and shrinking GDP.
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