Inflation has decreased to 2.7% this month, down from 2.9% the previous month. This marks the lowest inflation rate in over three years, specifically since March 2021. At that time, the overnight interest rate was 0.25%. Despite this improvement, shelter costs continue to drive inflation, with increases at 6.4%, up from 4.9% last year. Mortgage interest costs have surged by 24.5%, and rent has risen by 8.2% compared to April last year. When excluding shelter costs from the Consumer Price Index (CPI) basket, inflation would be just 1.2%.This decline in inflation could open the door for a potential interest rate cut at the upcoming June 5th announcement by the Bank of Canada (BoC). However, with the current inflation rate still above the 2% target, sustained reductions to the target level are preferred before any decisive action. The market is pricing in a 55% chance of a rate cut in June, but certainty remains low. The BoC’s approach is reactive, and it could be six months before inflation stabilizes at 2%.In April, the BoC slightly revised its neutral rate, which is now set at 2.25% to 3.25%, up from the previous 2-3% range. This revision, influenced by higher US neutral rates and domestic factors such as higher long-term labor input growth offset by lower productivity growth, suggests a relaxation of stringent economic requirements.The BoC’s updated assessment considers the impact of government debt and population growth on the neutral rate. Increased government debt and more generous public pensions put upward pressure on the neutral rate, suggesting prolonged higher taxes, ongoing inflationary pressure and overall higher prices.The Canada Revenue Agency (CRA) now requires tenants to withhold and remit 25% of their rent if their landlord is a non-resident. This is to ensure the CRA collects taxes owed by foreign property owners. Tenants must also file an NR4 tax form, and failure to comply can result in the tenant being held liable for unpaid taxes, penalties, and interest. This policy faces practical challenges due to the lack of a public beneficial ownership registry, making it difficult for tenants to verify if their landlord is a non-resident. Consequently, tenants could face eviction for not paying full rent if they withhold the 25%.RBC predicts significant interest rate cuts starting in 2024 and going through 2025, with a 25-basis point cut anticipated in June and a total of 200 basis points in cuts by the end of next year. They expect the Canadian dollar to weaken, impacting housing affordability and resale activity. Despite weak affordability, resale activity is expected to pick up mid-year as rates fall. Home prices, which were down 2.6% in 2023, are projected to decrease by another 1% in 2024 before rising by 3.1% in 2025.Active home listings have reached over 13,900, marking a five-year high since September 2019. While this increase in inventory might lead to better deals for buyers, it will take months to absorb this supply. A potential rate cut could temporarily stimulatebuyer activity, particularly in typically slow months like August when motivated sellers might offer better deals. _________________________________ Contact Us To Book Your Private Consultation: 📆 https://calendly.com/thevancouverlife Dan Wurtele, PREC, REIA 604.809.0834 [email protected] Ryan Dash PREC 778.898.0089 [email protected] www.thevancouverlife.com

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“What did the council decide on item 42?” — answered with the speaker and the moment.

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