Whether it be fiscal or monetary (or both), stimulus will probably be coming.
The Two Minute Market Update is intended to keep readers apprised of what’s going on in local real estate markets and in the global financial markets that affect real estate via inflation, interest rates, capital flows and public policy. It is best suited for those not able to keep up with all the news every day, but still wanting to be informed.
Two Minute Market Update, July 3rd, 2025
The “summer doldrums” for Vancouver real estate has officially begun. But there are good reasons to think that it may not be what it typically is. First, we are operating from a higher level of active listings than we have seen in a decade. Second, the sales volumes that most were expecting to see in the spring have not materialized. This is evident in the statistics and anecdotally, as buyers sit out the “uncertainty” caused by geopolitical turmoil. Should that uncertainty be met by some resolution, and it has already – partially, those sideline buyers may swoop in to create an unusually busy summer market. Sellers are also notably becoming impatient and reducing prices, which in a lot of cases is what buyers are waiting for to start searching for properties more seriously.
Interest rates are not playing ball for buyers or sellers, as both are expecting lower rates to help them make their transactions easier. Expectations for a rate cut in the summer remain at less than 25%, and now with just one cut expected for the rest of the year, lower mortgage rates are not likely to impact the market significantly. This, however, is now starting to become its own geopolitical risk factor as central bank rates are becoming the number one target of the Trump Administration who believe they should be much lower than they are. Central banks and politicians have been kept independent to avoid these kinds of clashes. That independence is being compromised and the current chair of the US Federal Reserve may be replaced with a more compliant actor. How might this affect interest rates in Canada? While not directly connected, the Bank of Canada would have a hard time maintaining a much lower US rate, as the Canadian Dollar would appreciate rapidly, affecting competitiveness. Might they have to reduce rates in kind?
This drama, combined with the fiscal bazooka being unleashed state-side with the “One Big Beautiful Bill” is pushing bond rates higher – not lower. Fiscal expansion is also being implied in Canada, but we won’t be seeing a budget until at least October. Low Population growth is beginning to challenge the economic data. Whether it be fiscal or monetary (or both), stimulus will probably be coming. Unless it is matched by policy – such as capital gains tax changes – this stimulus is likely to result in a Big Beautiful Bull Market for housing. It may seem like déjà vu with the stimulus from the 2008 financial crisis and the Covid-19 crisis resulting in runaway real estate prices. It should be emphasized that this time around, policymakers are dead-set against prices rising again. They will take extraordinary measures to prevent it. To understand how and why this inflationary stimulus is the most likely outcome of our current situation (both in Canada and the US), this is a good summary.
Not missing a beat, the Canadian and US stock markets are both setting new records, reacting very quickly to the expected liquidity the Trump Administration will be delivering. If the real value of currency is to decline, you don’t want to be sitting in cash, so asset prices are being pushed higher. Financials companies are leading the way with Materials not far behind. The “Magnificent 7” stocks are still 5% below their early-December peak.
Bitcoin and Gold both sit just 2% below their respective all-time highs. Should the stimulus narrative persist much longer, those highs will be taken out and both assets could see higher prices in the near-term. Assets do tend to react negatively to geopolitical events that dictate “risk off” mentality, so that would be the risk to the downside. Of course, both are volatile (although increasingly less-so). Oil reacted to the flare up of the Israel-Iran conflict by surging toward $80/barrel. With the US bombing of Iranian nuclear facilities it dropped back toward $65, regaining its downward trajectory since 2022. The passing of the federal Infrastructure bill should in theory have some impact on approvals for mining projects, pipelines, ports, and other large pieces of infrastructure. But they will take many years before impacting productivity. Be careful investing money too early in projects boasting this bill as the holy grail.
Matthew Stiles
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Disclaimer: The information provided in this column is for general informational purposes only and does not constitute financial, investment, or other professional advice. While I strive to provide accurate and up-to-date information, I make no warranties or representations as to its accuracy, completeness, or reliability. Any actions taken based on this information are at your own risk. Always consult with a qualified financial advisor before making any investment decisions.