The Bank of Canada’s interest rate cut amid recession expectations is an attempt to support the economy, but it has varying effects on the real estate market. On one hand, lowering borrowing costs will increase buyers' ability to enter the market, which may lead to a rise in demand for homes and an increase in prices, especially in major cities like Toronto and Vancouver.

1. Increased demand despite recession risks

Although the interest rate cut encourages demand, recession expectations mean a decline in household income and increased investment caution. This could lead to a short-term boost in demand for real estate, followed by a stagnation in activity if economic conditions deteriorate.

2. Stimulus for real estate speculation

The decline in interest rates may encourage investors to buy properties as safe assets during uncertain times. However, ongoing supply shortages may drive up prices, making homeownership more difficult for new buyers.

3. Recession's impact on purchasing decisions

In the event of an actual economic recession, household income is expected to decline and unemployment rates to rise, which may limit the impact of the interest rate cut. Any improvement in purchasing power may fade if consumer confidence in economic stability decreases.

4. Recession probabilities and limited impact of interest rate cuts

If the recession persists for a long time, it may lead to increased defaults and a slowdown in the real estate market despite lower interest rates. Conversely, if the recession is short-lived, the interest rate cut could lead to market stabilization and boost recovery.

5. Possible scenarios

• In the case of no deep recession: The interest rate cut may lead to a sustainable recovery in the real estate market.

• In the case of a deep recession: Declining household income and rising unemployment may limit the impact of the interest rate cut, leading to a downturn in the real estate market.

• In the case of ongoing supply limitations: Prices may rise despite weak purchasing power.

The interest rate cut provides temporary support for the real estate market, but its lasting impact depends on the depth of the recession and how successfully the government can increase housing supply and address the cost of living issue.