The Bank of Canada is getting what seems like unusual advice from one of the country’s leading real estate companies.
Only a small number of economists are still calling for Bank of Canada governor Stephen Poloz to hold off lowering the country’s key lending level
Royal LePage says it’s worried a further rate cut might add fuel to some of Canada’s already red hot housing markets — a position that may seem at odds with a typical stance from realtors that all rate cuts are good because they make borrowing cheaper and bring more buyers into the market.
“We believe an additional interest rate cut, which has been discussed with increasing frequency in recent weeks, would be inappropriate policy at this time,” said Phil Soper, chief executive of Royal LePage, in a report Tuesday.
“The country’s all-important real estate market simply does not need a rate cut.”
The firm’s second quarter market survey found the average price of a home in Canada increased between 3.9 per cent and 7.5 per cent over the same period last year on a national basis. During the period, prices in the detached bungalow segment were up 7.5 per cent to $438,938, standard two-storey homes rose 6.8 per cent to $471,002. and condominiums appreciated 3.9 per cent to $268,583.
But Royal LePage says the national prices are being driven by results in Toronto and Vancouver where strong labour markets have helped drive up values.
“Sales in residential real estate are firmly tied to consumer confidence,” said Soper. “This confidence is driven in large part by employment status and prospects. You can see this clearly in the Toronto-Hamilton region where positive full-time jobs trends, supported by the low interest rate environment, are encouraging home purchases in record numbers.”
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