Interest rate cuts kick-start sales

It’s early days yet, and we don’t want to get too excited, but there’s evidence the recent interest rate cuts by the Bank of Canada are already beginning to make a difference.

First, a quick recap. As our report, Navigating the GTA Housing Market, on page 28 discusses, the Bank of Canada on July 24 did what we all hoped when it announced its second consecutive interest rate cut, reducing the policy rate by 25 basis points to 4.25 per cent.

Notable pick-up

The hope now is that the move kicks off a notable pick-up in homebuying and building activity, and that more rate cuts are around the corner.

At least in the resale market, results for July are encouraging, as the Toronto Regional Real Estate Board (TRREB) reports that sales were up over June. Prices, too, seem to have responded, as average selling prices are up slightly on a month-over-month basis.

“We may be starting to see a positive impact from the two Bank of Canada rate cuts announced in June and July,” says TRREB President Jennifer Pearce. And with the cost of borrowing expected to decline further in the coming months, sales and prices should respond in kind.

Signs of recovery

On the new homes side, though GTA new home sales remained slow in June, they are showing early signs of recovery, according to the Building Industry and Land Development Association (BILD). “We are continuing to see some sales return in select regions of the GTA, predominantly single-family homes and outside of the city of Toronto,” says Justin Sherwood, senior vice-president of communications and stakeholder relations at BILD.

As the market continues to adjust to the lower rates – hopefully with more to come – and we round the corner out of the slower summer months and into fall, it’s reasonable to expect that resale and new home results continue to improve.

Use this time, then, to prepare and plan your purchase. The kick-start may have begun.