With Bank of Canada’s decision to cut interest rate, is now a good time to buy a house in canada?
Is now a good time to buy a house in canada? Well, real estate market analysts suggest that due to Bank of Canada’s recent decision to lower its key interest rate this could be the opportunity many potential homebuyers have been waiting for. The central bank announced on Wednesday the rate reduction to 4,75%, marking its first cut in over four years.
Recently, some of Canada’s major cities have seen a surge in home listings, with many sellers putting their properties on the market despite the demand from buyers not keeping pace. In the Greater Toronto Area, new listings increased by 21.1% year-over-year in the last month, totaling 18,612 properties. However, home sales have dropped. Toronto saw a 21.7% decrease in sales, according to the Toronto Regional Real Estate Board. The board reported that 7,013 homes were sold in May, down from 8,960 in the same month last year. The Board president, Jennifer Pearce, noted that homebuyers were looking for “clear signs” of declining mortgage rates before committing to purchases.
The Effects of the Rate Cut on the Housing Market
“As borrowing costs decrease over the next 18 months, more buyers are expected to enter the market, including many first-time buyers. This will open up much needed space in a relatively tight rental market”, Pearce stated in a press release.
A Leger survey done earlier this year, commissioned by Royal LePage, revealed that around 56% of Canadian adults active in the housing market had postponed their property search since the Bank of Canada started raising its key lending rate from near zero in March 2022. Of those waiting, just over half said they would resume their search if interest rates decreased.
Home Buyers Waiting for Cuts
“There certainly is pent-up demand. Typically when rates go down, prices go up. So this would be the time where people come off the sidelines, knowing and anticipating that prices are likely to rise”, said Karen Yolevski, chief operating officer of Royal LePage Real Estate Services.
In the Greater Toronto Area, the average home selling price fell 2.5% year-over-year to $1,165,691 last month. The City of Toronto saw 2,701 sales, a 17.3% decrease from May 2023, while in the rest of the GTA dropped 24.3% to 4,312.
“In general, buyers have been looking for some positive signs. The sentiment effect of this always punches above the actual dollar and cents. When people are looking for any bit of good news, they’ll take it”, said Scott Ingram, a sales representative with Century 21 Regal Realty in Toronto.
Yolevski warned that the market recovery will not be immediate, predicting a gradual return to higher sales levels. “People purchase homes less so on the sticker price, the actual sale price of the property, but more so on the monthly carrying cost of the property. So interest rates going down will, over time, lower monthly carrying costs and that will ease some of the burden that homebuyers feel, particularly first-time buyers, if they’re feeling stretched”, Yolevski added.