Canada Warns of Economic Cooling as Housing Market Loses Momentum

Canada is warning of signs of economic cooling as the country’s once-resilient housing market shows clear signs of losing momentum, adding to concerns about growth prospects in the months ahead.

Recent data indicate a slowdown in home sales and construction activity across several major cities, reflecting the impact of higher interest rates and stretched affordability. Rising borrowing costs have dampened buyer demand, while developers have delayed new projects amid uncertain market conditions. Economists say the housing sector, a key driver of Canada’s economy, is no longer providing the same level of support it did during the post-pandemic recovery.

Government officials and central bank policymakers have acknowledged the shift. The Bank of Canada has maintained a cautious stance, signalling that while inflation pressures have eased, the economy is showing signs of strain. Slower activity in housing has also affected related industries, including construction, finance, and retail, amplifying the broader economic impact.

Consumer confidence has begun to soften as households adjust to higher mortgage payments and rising living costs. Many homeowners renewing loans at higher rates are cutting back on discretionary spending, contributing to weaker demand across the economy. Analysts warn that this trend could intensify if interest rates remain elevated for an extended period.

Despite the slowdown, officials stress that Canada’s financial system remains stable. Employment levels have held up relatively well, and immigration continues to support long-term demand. However, policymakers have cautioned that near-term growth may remain subdued as the economy absorbs tighter financial conditions.

The federal government has pointed to targeted measures aimed at supporting housing supply and protecting vulnerable households, though critics argue that relief may take time to filter through. Market watchers say the balance between controlling inflation and avoiding a sharper downturn will be a key challenge in the coming quarters.

Looking ahead, economists expect housing activity to remain under pressure until borrowing costs ease or incomes catch up with prices. For now, the slowdown in the property market is reinforcing concerns that Canada’s economy may be entering a period of softer growth rather than a sharp downturn.

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