This past January was the first time in over a year that the
Bank of Canada has cut the Canadian interest rate. The Canadian interest rate
cut announced was .25%, reducing the rate from 1% down to 0.75%.
According to a recent article published by CREA, the Bank of Canada’s
decision to reduce Canadian interest rates was thanks to the recent sharp drop
in oil. The article quotes the Bank of Canada as saying that the recent drop in
oil “will be negative for [economic]
growth and underlying inflation in Canada.”
So what does all
of this mean for the real estate market? Economists are constantly speculating
about the future of the real estate market.
In the past few
months alone, Deutsche Bank and the IMF both published reports stating that the
value of Canadian homes are overinflated and that the Canadian housing market
is headed for a slowdown. These opinions were based around a number of factors,
including the amount of debt that Canadian families are carrying.
All of this
speculation makes it a constant challenge for real estate sales professionals
to keep on track of what homes are worth, and what could be in the cards for a
particular neighbourhood or the market as a whole in the future.
Agree/Disagree?
Real estate follows supply and demand and while some economists are calling for
a cool-down in the real estate market, it also would seem logical that lower
interest rates will lead to more people wanting to buy and so more demand in
the real estate market.
Shortly after the
Bank of Canada announced the Jan 2015 Canadian interest rate cut, the Star reported that the big banks had cut
their prime lending rates: http://www.thestar.com/business/2015/01/27/rbc-cuts-prime-lending-rate.html. Nothing is more enticing to someone
thinking about buying a home than lower interest rates.
Realistically speaking, since the Bank of Canada has not
changed Canada’s lending rate in more than a year, no one knows how long it
will last – if it will go down again, remain the same, or be increased in the
near future. Adding to that, if the most recent rate cut was a result of the
low oil prices, if oil prices begin to climb again, so may Canada’s lending
rate.
On the front line, the most recent Canadian interest rate
cut represents an opportunity to you. Canadians have real incentive right now
if they were planning on buying a home or moving to another home – to buy now
instead of waiting.
If you would like to keep on top of the Bank of Canada’s
scheduled Interest Rate Announcements, you can do so here http://www.bankofcanada.ca/core-functions/monetary-policy/key-interest-rate/.
Wondering how to assess the value of properties or the
accuracy of a listing value? Try ViMO, a mobile app for real estate that you
can access to view listings and also pull sales comps when on the go. Visit www.myvimo.ca.
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