As the week begins and the Bank of Canada's rate announcement is two days away, many Canadians are wondering what the next move for the BOC will be.
To get an idea, let's look at some data. The consumer confidence index remains at levels last seen during the 2008 financial crisis and at the depths of the COVID-19 lockdowns. This is deep into recessionary territory.
After 2 months of back-to-back increases in the Consumer Price Index, September posted a decrease to 3.8%. Analysts had been expecting the headline inflation rate to stay at 4%, so this is welcome news for the BOC.
A third-quarter survey by the Bank of Canada showed businesses were gloomy on the economic outlook, much in line with the Consumer Confidence Index above, reinforcing lower inflation expectations (in the face of rates going up).
Seasonally adjusted Canadian home sales fell 1.8% in September from the month before, and new listings jumped 6.3% according to the Canadian Real Estate Association (CREA). Weakness was widespread across Canada, including in Calgary, which has been leading the Canadian Real Estate Market as of late. The MLS home price index also slipped 0.3% from the month before.
This is causing some economists to think that the Bank of Canada will pivot to interest rate cuts sooner than markets are currently pricing in. However, Tiff Macklem has made it clear that they will be deliberating between hiking rates or pausing to let the current hikes work through the markets.
Based on this data, it seems clear that there will be another pause on October 25th. However, I would caution that rate hikes are still on the table, and signs are pointing to rates settling higher than we have been used to over the last decade.
In other news, we all have heard of the increasing regulations around short-term rental units. New York City has outright banned them, BC is imposing regulations, many municipalities are regulated, and now the Canadian Government is looking at possibly enacting legislation to limit short-term rental units in Canada. With Airbnb arbitrage businesses and the onset of higher rates, many investors pivoted a portion of their portfolios to STRs to boost their income. If you own short-term rental units, now may be a good time to plan what the future may look like if regulations prohibit them. Could the units you've set aside for STR be repurposed as long- or mid-term rentals? Do they work as a lifestyle property? Of course, we don't have many details about what regulations may look like; however, many levels of government are acting to increase the supply of rental units for tenants. It pays to be nimble and have options for your portfolio.
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I'd love to hear your thoughts on this! Have a great week while working past those obstacles on your climb to success. Let's Grow Together!
Jonathan Beam
Real Estate Investor and Entrepreneur
Jonathan Beam is a real estate investor in the Niagara region who is passionate about helping you achieve financial freedom through real estate. He works with new and experienced investors to formulate a plan that fits your specific situation and provides market guidance and consultation on the best places and strategies to pursue within the Niagara Region. Book a free, half hour no obligation consultation to see how he can help you to achieve your goals. His travels are available at www.realestateandrepeat.com
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