Industry data shows buyers are watching the property market carefully, unsure how the latest cut in interest rate will affect prices against a backdrop of economic challenges.
Smart buyers are already on the move, convinced values will rebound as the cost of mortgages falls.
It’s generally accepted that any central bank needs to cut rates by a full 1% to convince buyers to change their cautious behaviour.
Pundits reading the tea leaves of the financial world are convinced the Bank of Canada will cut even deeper into 2025. As a result, savvy buyers are active now, determined to strike a deal before property values rise on the back of cheaper access to loans.
Affordability is still an issue, but these buyers believe the short-term pain of today’s 4.25% mortgage rate will be worth the discount of buying at today’s prices.
We are already seeing this trend emerge.
The Royal Bank of Canada (RBC) reports that home resales were up 1.3% between July and August. Inventories are growing, too. They’re double the level of those in 2021.
And the MLS Home Price Index remains steady at $717,000, a 3.9% decline from 12 months ago.
The biggest unknown is the state of our economy, especially as job security is a major influence on property market confidence.
RBC said in a recent report that the labour market was “softening at a pace and magnitude that is consistent with prior recessions”.
However, it added that 80% of the rise in unemployment has come disproportionately from students and new graduates. So, the jobless rate of 6.6% is slightly misleading.
Here’s how to respond to today’s market as a buyer:
- Prioritise Search: The market moves quickly, and buyers wanting to capitalise on the current situation know they don’t have months to hang around. Focus on your target areas and the type and size of property you desire.
- Cash Is King: Get your finances lined up. Have a pre-approved mortgage so you can make offers with confidence.
- Talk to Agents: Demonstrate to an agent that you’re aware of the market’s current status, as this signals you’re an informed and serious buyer.
- Don’t Rush: The window of opportunity won’t last forever, but never rush into a decision. Don’t let FOMO (fear of missing out) sway your judgment.
- Due Diligence: There’s no excuse for skipping essential steps in the buying process. Always order building and pest inspections.
- Start Negotiating: Be ready to act decisively. Your research will give you a strong idea of the home’s value. If you’re serious about a deal, don’t low-ball. Make an offer and justify how you came to that number. Leave cash in reserve in case you need to give a little ground.
- Juggling Act: If you find more than one dream property, start negotiating on multiple fronts. There’s no rule that says you can only focus on one property at a time.
- Extra Care: Always insist on contingencies as part of your deal. These would include the property passing a building inspection, and your ability to obtain the necessary finance.