Real estate experts say the Bank of Canada’s decision to drop the interest rate for the fifth consecutive time will spark more activity over the coming months in Canada’s housing market.
“It makes no improvement to borrowing power, but it certainly will have maybe a little bit of firepower for those who want to enter the market,” Harrison told The Epoch Times in a phone interview.
Harrison said the housing market has already been picking up since the BoC cut rates earlier in the year.
“We’ve already been seeing a huge uptick in both pre-approval inquiries and, actually, purchases. It seems like there’s a little bit of a flurry at the end of 2024 now with people buying, especially in that million to million five price point,” he said.
Royal LePage president and CEO Phil Soper told The Epoch Times the BoC’s October rate cut had a big impact on the real estate market.
“There wasn’t much response to the first basis point cut, but the 50 basis point cut in October really changed things. We saw volumes leap ahead in our two most expensive markets,” he said during a phone interview with The Epoch Times. “In Toronto in October, sales were up 44 percent year over year, and in November, 40 percent.”
It’s something that Vancouver has also been seeing.
“We’ve now had two months of about 30 percent increases year over year in sales in our market, which is quite strong and very significant,” Andrew Lis, economist at Greater Vancouver Realtors told The Epoch Times in a phone interview.
A Bank of Canada rate drop creates an emotional reaction in those looking to buy a home, according to Saskatchewan mortgage specialist Ronald Quaroni.
“It puts people in an emotional place to buy houses. Now the realistic factors of people getting into the market are still really tough. There’s just such a lack of supply of homes that it does make it tough. Even though these rates are coming down, things are so competitive with a lack of inventory that it is still tough for buyers getting into it,” he said during a phone interview with The Epoch Times.
Lis agrees that BoC rates have a clear impact.
“I think this half point cut that they’ve announced here is going to be quite stimulative as well,” he said.
“My theory is that by moving that cap, it’s going to stimulate a lot of demand for that segment of the market,” Lis said.
Prices Predicted to Rise
Soper said he expected to see an increase in interest from both investors and homebuyers.“There will be renewed interest, because the last couple of years have been very hard on small business and individual landlords,” he said. “High borrowing rates have created a situation where mortgage payments have been higher than the rents the property could support, and that will change as borrowing costs drop and condominiums continue to appreciate.”
He recommends that those who want to buy a home do so sooner rather than later.
“We know that increases in demand are followed by increases in price. In other words, the swell of building demand is a leading indicator of price changes to follow. So it likely makes sense for people who are going to be purchasing say over the next year, regardless, to make a decision earlier, rather than later,” Soper said.
Lis said the BoC rate cut spelled good news for homeowners who will be refinancing soon.
“A variable rate could be a very good option for many people who are coming due for renewal or refinance,” he said. “That is potentially very good news for people who are looking to save a few dollars and chip away at that principle a little bit more.”
But inventory shortages would still pose a challenge, Quaroni said.
“This increase in the rates, I think, just moves more buyers into an already tight housing market, and there’s so little in certain sectors of that housing market, especially single family homes, that I think we are going to see an increase in prices basically across the board, in Saskatchewan.”
Experts recommend that homebuyers be prepared by talking to a mortgage specialist and getting mortgage pre-approval.
