The Canadian economy continues to slow, with per-person GDP falling for the sixth straight quarter, despite some signs of recovery in areas like consumer spending and residential investment. This slowdown means buyers and sellers could see shifting market conditions:
- For Buyers: Lower economic growth and potential interest rate cuts might ease borrowing costs, making homes more affordable. However, slower wage growth and a weaker economy could affect purchasing power.
- For Sellers: While residential investment is up slightly, slower overall growth and cautious buyers could mean homes take longer to sell or require more competitive pricing.
The good news? Lower interest rates expected in December could bring more activity to the market, benefiting both buyers and sellers.
Details:
The recent GDP report highlights a continued economic slowdown in Canada, with per-capita GDP declining for the sixth consecutive quarter, signaling challenges despite some sectoral rebounds. The annualized GDP growth of 1.0% in Q3 was driven largely by a jump in government spending, which accounted for most of the positive momentum. Without this increase, GDP would have declined outright. Consumer spending rose by 3.5%, and residential investment saw a modest recovery after four quarters of decline, climbing by 3.0%. However, business investment plummeted 11% due to reduced equipment purchases, and exports declined for a second straight quarter despite favorable conditions like a weaker Canadian dollar.
Momentum heading into Q4 remains muted, with monthly GDP growth at just 0.1% in September and a similar early estimate for October. These figures, while preliminary, suggest growth could underperform the Bank of Canada’s Q4 forecast of 2.0%. For sellers and buyers in interest-rate-sensitive markets like real estate, the ongoing economic softness may influence demand and pricing trends, as well as lending conditions, particularly if further rate cuts are implemented by the BoC.