Until Canada’s productivity and competitiveness disadvantages can be eliminated, bouts of inflation and declining GDP/capita will be the path for the foreseeable future.
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, March 11th, 2025
As we approach the end of winter, there are still few clues remaining to the direction of the market. North Shore properties are still transacting when priced reasonably, yet buyers remain hesitant due to the barrage of headlines originating south of the border. Despite that, prices are inching higher in North Vancouver. Not enough to say it’s a trend, but we will keep an eye on it to see if it persists with higher transaction volumes in the first months of spring.
The Bank of Canada is expected to cut rates to 2.75% on Wednesday, further increasing the spread with the federal reserve in the US, who are expected to hold rates steady a week later. This growing spread is influencing the Canadian Dollar which is starting to get comfortable below $0.70. This weakness in the Loonie will start to impact inflation at the same time as retaliatory tariffs result in rising costs on consumers. Retailers are already noticeably re-sourcing their supply chains. While the tariff chatter changes daily, economists are forecasting a 2.5-3% GDP hit and the loss of hundreds of thousands of jobs. This would invariably impact the housing market, force lenders to curtail their issuance of new mortgages, and further crater the investment condo market. Rate cuts, government budget deficits, and targeted supports for industry will be the likely prescriptions, all of which are inflationary. Lower rates might be a short-term phenomenon, with sharp increases again needed to stamp out the resultant inflation. Until Canada’s productivity and competitiveness disadvantages can be eliminated, bouts of inflation and declining GDP/capita will be the path for the foreseeable future.
There seems to exist a concerted effort from President Trump, Treasury Secretary Bessent and others to be talking down the stock market and the broader economy (as it’s currently constructed) to push interest rates lower. Whether this has something to do with a desire to reorganize the US economy generally, or to reimagine how their $36 Trillion in debt is structured (century bonds?), the tactics are unconventional to say the least. We’re not used to leaders of major countries actively engaging in self-harm. Regardless, bond yields are coming down in both Canada and the US, reducing refinancing costs on government and corporate (and mortgage) debt, and that’s a good thing for economic health.
Stock markets, as mentioned above, are taking a beating. The major US markets are off by 10% or more, with most of that owing to the 20% selloff in the “Magnificent 7” stocks. Valuations are still high, historically speaking, so there’s plenty of room for more pain. But bear in mind that when everything hinges on the words of a few men, the opposite could just as easily materialize. This would be the reason that the Volatility Index (VIX) remains elevated.
Bitcoin has dipped below $80,000 (twice) before rallying as details about the “Strategic Crypto Reserve” disappointed temperamental short-term speculators. Gold and other metals still remain elevated as safe havens, a condition that will flow through to building costs. Oil is reacting to the lower growth expectations with prices now in the mid-$60s. A ceasefire holding in the Ukraine/Russia war could impact that commodity significantly.
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.