Interest rate cut a small but yet hopeful start
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A reduction of 25 basis points may seem small but it diffuses some of the negative energy out there
The big news in June was that the Bank of Canada reduced its target for the overnight rate to 4.75 per cent (https://bit.ly/3Xd2G1s). It was the first rate cut since March 2020. Although the Toronto housing market will not change dramatically as a result, it is a hopeful step in the right direction.
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This reduction of 25 basis points in the policy interest rate may seem small, but it offers a breath of fresh air and diffuses some of the negative energy out there. It signifies hope that this is the beginning of real and badly needed change in the real estate marketplace, and hope is essential when it comes to our economy.
In addition, Canada’s inflation rate is slowly easing toward the 2 per cent target Bank of Canada would like to see, so again, there is hope for more rate cuts this year. We will likely see many potential home and condominium buyers wait to see what the Bank of Canada decides. The market in Toronto will not change overnight, but the door has opened, and it brings some relief to borrowers. I don’t think rates will go back down to where we were at during COVID-19 again. I do think that 4.25 per cent by the end of this year is a fair bet. As a result, our market may take until Spring 2025 to recover.
Our population growth is undeniable. From October 1 to December 31, 2023 (a period of only three months), Canada’s population increased by 241,494 people. This was the highest rate of growth during a fourth quarter since 1956! This year in March, according to Statistics Canada, our country’s population hit 41 million, with more than 97 per cent of the growth due to immigration. Remember that people always need somewhere to live, whether they are looking to rent or to buy a house or condominium.
The Greater Toronto Area is one of the most coveted residential destinations in the world, and a healthy percentage of immigrants choose to settle here each year. Superior educational facilities, world-class hospitals, incredible shopping, amazing sports, inspiring arts and cultural opportunities … the list goes on of amenities that provide us with the high quality of life that is envied around the world.
Through my decades of industry experience, I have learned that after low economic cycles when the market comes back, it comes back with a vengeance. There is a massive pent-up demand for houses and condos in Toronto and the Greater Toronto Area – and frankly, across Canada – that will not go away any time soon.
Many of our major clients at Baker Real Estate Incorporated are pencilling in launches, and we have some big, exciting projects coming in Toronto! The stage is set for success. Let’s hope that with future announcements, the Bank of Canada takes yet more steps in the right direction.
Barbara Lawlor is CEO at Baker Real Estate Inc. Keep current with The Baker
Blog at blog.baker@realestate.com
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