Interest rate cuts would ease housing supply constraint, Fraser suggests

globalnews.ca:

Cuts to interest rates in Canada may lead to better housing supply, Housing Minister Sean Fraser suggests.

Fraser told reporters in Ottawa on Tuesday that based on conversations he’s had with housing developers, his feeling is that stalled projects will begin to move forward if that happens.

“Don’t ignore the impact that interest rates have on restricting supply as well,” he said.

“My expectation is if we see a dip in interest rates over the course of this year, a lot of the developers that I’ve spoken to will start those projects that are marginal today, but will actually pencil out six months from now if interest rates were to take a dip.”

Fraser’s comments come as Canada’s housing market is showing early signs of recovery, with several realtors telling Reuters last week that pent-up demand, a chronic shortage of homes, a spike in rents and hopes of an interest rate cut may fuel a rally in the sector.

The Bank of Canada’s policy interest rate has sat a five per cent since July 12, and Governor Tiff Macklem said on Jan. 24 conversations at the central bank have shifted from debating whether interest rates are high enough, to how long the central bank needs to keep rates at current levels.

However, the central bank has not yet indicated if and when cuts to interest rates are coming.

Many economists are predicting that interest rate cuts will begin in April or June, but Macklem has explicitly said interest rates alone can’t “fix” higher shelter cost, which is one of the biggest contributors to inflation.

Regardless, some buyers are already coming out of hibernation.

John Pasalis of Realosophy Realty told Reuters that a three-bedroom townhouse his company listed for $828,000 last month in Newmarket, Ont., received 40