Dividend 15 Split Corp T.DFN

Rate cuts not enough

[mouserman]

The Financial Post reports in its Friday, July 5, edition that with national home prices treading water, real estate inventory growing and housing affordability still atrocious, last month's quarter-point rate cut from the Bank of Canada, while helpful, was the economic equivalent of bringing a butter knife to a gunfight. The Post's regular guest columnist Robert McLister writes that Canadian real estate and over-leveraged borrowers need a bigger saviour. He says a measly 25 basis point drop in average mortgage rates only translates into a little more than 2 per cent improvement in payment affordability (home buying power). Hence, the psychological boost from the BOC's initial cut of the cycle can only take the market so far. What real estate really needs is to wake up the sleeping giants -- sidelined buyers. On top of domestic housing demand, Canada has seen its population rise by a record 1.27 million in the 12 months through June 30, 1.06 million in the period before that and 0.54 million in the 12 months before that. The Post says in the last three years, we have seen 2.87 million new housing seekers emerge. That is more than the entire population of Manitoba and Saskatchewan combined.

[amugsgame]

The answer is not in further rate cuts but lower property prices. If the BOC cuts rates further while the FED remains unmoved then the CDN $ will drop, import prices increase and we're back to inflationary pressure. In 1989 the real estate market was in the stratosphere with high interest rates and then fell for 5 years until starting to rise again in 1994. Hopefully that kind of market will

[Martincat]

How can lower property prices happen when there are serious housing shortages, BOC cutting rates and immigration on the rise?

[marcrobert]

more people will sell if rates fall. many sellers have to get new mortgages at a (much) higher rate if they upgrade or move now, so as rates come off = more sellers

[flamingogold]

There is no housing shortage (GTA). That is a media lie. Available inventory is at a 14 year high. We have an affordability crises not a housing shortage. Big difference.