For the first time in forever (March 2020), the Bank of Canada has cut rates. The key lending rate is down 25 basis points to 4.75%. What does this mean for those of us paying the bills, working, buying groceries, raising kids, and generally living? Very little. Monthly payments on variable rates may decrease slightly. Homebuyers’ purchasing power won’t change that much.
However, much is being made of this highly anticipated rate cut. Although the cut doesn’t materially affect our pocketbooks, it dramatically boosts consumer confidence in the Toronto real estate market. The Toronto market is driven mainly by consumer confidence and interest rates. The lower the rates, the higher the confidence. Low rates and high confidence drive up real estate prices. Do you see where I’m going with this? Prices are going up.
The Toronto real estate market currently has tight competition, particularly for properties under 1.5 million. With the rate cut, we anticipate a shift in the market, with buyers now vying for properties in the 1.7-2 million range. Despite a high number of listings, the demand still outstrips supply. While properties may not be selling as swiftly as they did a few months ago, those priced appropriately are finding buyers. Houses priced for a bidding war are still receiving multiple offers.
We expect one more month of frantic real estate and then a quiet summer. The market will likely pick back up again with vigor in September. If you are currently a condo buyer or a buyer for a house over 2 million, don’t wait for the fall market because prices will be higher. Jump in now while those segments of the market are still sluggish.
If you are in a super competitive market, go see every house that is on the market, even if you don’t think you’ll love it. The houses that need a bit of work are selling for good prices.
