After cutting interest rates more aggressively than any Western economy, the Bank of Canada (BoC) has decided it’s time for reflection and has kept the cash rate on hold at 2.75%, ending a 14-month run of cuts.
The central bank held the rate at 5% from July 2023 to May 2024 before beginning a series of seven cuts that has now stalled.
Many analysts believe we’ll see at least two more cuts before the end of the year.
For homeowners and buyers, this will be welcome news.
The real estate market continues to struggle to gain momentum since the post-Covid hike in rates to 5%.
More recently, a series of economic events, most notably the threat of US tariffs and a weakening economy, injected caution into the market.
Sellers are now showing increasing confidence. More homes are for sale across Canada than for the past six years.
Values are down 3.6% year-on-year, but that’s due to buyers now having more choice and negotiation leverage, plus some remaining economic anxiety. The prospect of a wider Middle East conflict and higher oil prices hasn’t helped.
Nevertheless, the opportunity for buyers has rarely been better in recent memory.
Investors have an incredible opportunity in cities like Toronto and Vancouver, where inventory is at a 12-year high.
For those who are able to move quickly, the economic numbers are lining up nicely, and we can expect them to create a healthy property market over the next 12 months and beyond.
The Gross Domestic Product (GDP) growth for Q1 came in at 2.2%, which was higher than the BoC had forecast.
Consumer Price Index (CPI) stands at 1.7%, which is well within the BoC’s target range. However, this number was influenced by the removal of the federal consumer carbon tax. Had it remained, inflation would be 2.3%.
A stronger set of economic data is much needed for the Toronto market, which has been struggling. It came to a virtual standstill at the height of the trade war fears, but it’s now showing green shoots.
Home resales jumped 8.4% from April to May – a second successive monthly increase, according to data from the Canadian Real Estate Association and RBC Economics.
Values are adrift 4.5% year-on-year mainly because Toronto has more residential properties for sale than for at least two decades.
The rules of “Supply and Demand” have put buyers in a strong position. Analysis from the Royal Bank of Canada suggests Toronto prices could erode further until there is a more equal balance between sellers and buyers.
And that means good buying opportunities for those who are prepared to act quickly.