Those who have followed real estate in North America, or specifically Toronto and the GTA knows that the lowest interest rates in history have been the #1 driver of the housing values increase. It’s been an unprecedented time. Money has almost been growing on trees, despite what your parents may have told you as a child, that “Money Doesn’t Grow On Trees“. Well it has…sort of. Our generation has been looking at just that, money trees! I digress.
The slow down in sales in the GTA will be short lived as the #1 driver, that’s right, interest rates are still very very very low. It’s only a matter of time before people jump back into this strong market.
That being said, the U.S. Federal Reserve is beginning to increase their lending rate due to a stronger economy. It is a smaller increase but it’s the first real movement upwards in a long time. The increase is from 1% to 1.25%. There will be a knock on effect to those who are strapped for cash. However it will not be enough to really impact the overall markets.
Canada typically follows what our neighbours to the south do. It is with little doubt that the Bank of Canada will also increase their rates. There is resounding belief that the Bank of Canada Governor General Stephen Poloz will likely be making an announcement soon. Again, not that it will be a substantial increase but I’m happy to see it go up. Even just for the selfish sake of believing housing affordability is a good thing for people. There are obviously other economic pros and cons. But from a real estate perspective I would be happy to see a slow increase over time, starting now. My buyers would have more optimism as the market would balance out somewhat. My seller’s would still be enjoying an increase in value over the period of ownership.
The increase will happen slowly as the government is well aware that a sharp increase would basically halt all markets and potentially put debt laden government institutions into bankruptcy let alone business across our country.
