Macklem expresses optimism on rental market
While rent prices in Canada could ease in the near future, Bank of Canada Governor Tiff Macklem said home prices might actually increase despite recent interest rate cuts.
During a news conference following the central bank’s third consecutive rate cut, Macklem expressed optimism about the rental market.
“With mortgage rates coming down and hopefully more supply coming into the rental market, along with a reduction in population growth, you should see rent prices come down,” the BoC governor said.
However, Macklem clarified that the decline in rent doesn't necessarily translate to lower home prices.
"House prices could well actually pick up a bit, even with overall inflation in shelter costs coming down,” he added.
The remarks come amid a cooling housing market, with average home prices in July at $724,800, a 4% drop compared to the previous summer, according to the Canadian Real Estate Association (CREA). The much-anticipated summer real estate rush failed to materialize, even after the Bank of Canada cut rates in June and July.
In Vancouver, sales were down 18% in August compared to July, with total sales volume sitting 26% below the 10-year average. Similarly, the Greater Toronto Area (GTA) saw a modest 0.6% increase in sales from July to August, but overall activity remained lower than historical trends, according to the Toronto Regional Real Estate Board (TRREB).
Macklem acknowledged the financial challenges facing Canadians, especially homeowners renewing their mortgages at higher rates than in previous years.
“Canadians are feeling the squeeze of higher interest rates,” he said. While recent rate cuts are expected to lower mortgage renewal costs, Macklem emphasized that the full relief would take time to materialize.
Meanwhile, rents in certain sectors have already started to decline, particularly for studio condos across Canada and in student housing markets like Kingston, where demand has slowed following the federal government’s decision to limit study permits for international students.
Read next: Bank of Canada decision reaction: Are even bigger rate cuts on the way?
Despite these shifts in the rental market, Macklem suggested that housing prices may stabilize or even rise due to ongoing demand. Although borrowing costs are starting to come down, mortgages are still relatively expensive, with fixed-rate loans averaging around 4.5%.
The real estate market continues to grapple with these mixed signals, but with lower rates on the horizon, experts expect conditions to improve gradually for both buyers and renters.
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