On Wednesday morning, the Bank of Canada announced it would lower its policy rate by 50 basis points to 3.75 per cent, down from 4.25 per cent. This could mean a big shift for Airdrie's real estate market.
Airdrie real estate Agent Tyler Baptist explained that today's announcement is significant.
"It's going to mean that we'll see more people reaching out for pre-approvals [mortgages]. It's going to get some of the buyers off the sidelines that have been waiting," she noted. "It's going to need a very busy spring probably, and certainly, we hope it's going to increase sales that are going to happen over the winter time."
While many are enthusiastic about the interest rate cuts, there has been speculation about whether such a major cut may spark worries about the nation's economy, leading to skittish investors. Tyler said that she, too, has heard echoes of this but said that the economic worries do not pertain to Alberta.
"I think that a lot of that comes from Ontario and Quebec and B.C. - especially Ontario and BC; they saw their prices skyrocket over the years, and now they're seeing it pull back. Whereas here in Alberta, we see positive net migration, and we aren't as affected by the overall tightening on the economy as maybe some other provinces are," Baptist added. "I think for us, it'll mean a stronger sales season and more growth."
What does it all mean for potential home buyers and seller?
The implications for potential homebuyers in Airdrie are clear: as interest rates drop, buying power increases. This dynamic could lead to a rush of buyers entering the market, ultimately increasing demand for homes while inventory remains low.
"More buyers with low inventory equals prices will go up," she said, emphasizing that while the timeline for these changes is uncertain, a continuation of recent market trends seems likely.
Baptist said sellers should also take note of these developments, as many home sellers are also home buyers; this means that if sellers list their homes now, they may find increased interest from potential buyers. Baptist said that the real question is when the effects on the market will be felt in Airdrie.
"How quickly will this announcement affect buyers? And will they get out there right now and start looking for homes before the end of 2024 - it may mean a busier season, but I don't think it will kick start that busy time until 2025. That's my prediction."
Bank of Canada's announcement
In its release, the Bank of Canada stated while the overnight rate is now 3.75 per cent, the Bank Rate is set at 4 per cent and the deposit rate remains at 3.75 per cent. This decision aligns with the Bank's ongoing efforts to normalize its balance sheet.
Officials noted that in light of inflation returning to around the two per cent target, the Governing Council has decided to reduce the policy rate by 50 basis points to bolster economic growth and maintain inflation within the target range of one to three per cent.
The Bank projects a global economic growth rate of approximately three per cent over the next two years. Notably, growth in the United States is now anticipated to be stronger than expected, while China's outlook remains weak.
In Canada, the economy grew by about two per cent in the first half of the year, with a projected growth rate of 1.75 per cent for the second half. The Bank forecasts a gradual strengthening of GDP growth over the coming years, supported by lower interest rates. This outlook reflects an expected increase in consumer spending per person and slower population growth.
Residential investment growth is projected to rise due to strong housing demand and increased spending on renovations. Business investment is also anticipated to strengthen, buoyed by rising demand and robust export activity, particularly from the United States. Overall, the Bank projects GDP growth of 2.1 per cent in 2025, and 2.3 per cent in 2026 as the economy strengthens and excess supply is gradually absorbed.
Inflation, measured by the Consumer Price Index (CPI), has decreased significantly from 2.7 per cent in June to 1.6 per cent in September. While shelter costs remain elevated, they are beginning to ease.
An excess supply of goods and services has reduced inflation in many sectors, with lower gasoline prices reflecting the drop in global oil prices. The Bank’s preferred core inflation measures are below 2.5 per cent, indicating a normalization of inflation expectations among businesses and consumers.
The next announcement regarding the overnight rate target is scheduled for December 11.
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