Resicom – Holiday Investment – 04-21 – LB

Canada Interest Rate Cut to Boost Property Market Further

The Canada interest rate cut is expected to further fuel the property market, as cheaper credit allows Canadians to compete with overseas property investors.

With the coronavirus spreading around the world and business activity slowing, the central bank slashed the Canada interest rate last Wednesday to 1.25 per cent from 1.75 per cent in an attempt to keep the economy humming. That followed deep anxiety in public markets where investors sought protection in bonds, sending yields down.

However, several cities, including Toronto and others in Southern Ontario, Ottawa, Montreal and Victoria, were already under pressure with strong demand for homes and dwindling supply inflating property values.

‘The dramatic Canada interest rate cuts and the related bond rally to record low yields will put housing on steroids,’ said Douglas Porter, chief economist with Bank of Montreal. ‘This will probably override consumer caution related to the coronavirus, although there may be a temporary chill in activity due to those concerns.’

This latest Canada interest rate cut, the first since the oil crash in 2015 when the central bank reduced the key interest rate twice to ward off a recession, and the change in the mortgage stress test are expected to further stimulate the real estate market.

Christopher Alexander, Re/Max’s regional director for Ontario and Eastern Canada, said: ‘It will accelerate an already active market. Multiple offers and competition are rampant across Southern Ontario and Ottawa. Even before this rate cut, mortgage rates were historically low.’

Even before the latest Canada interest rate cut, various Canadian property markets were booming.

The average selling price of a home in the Toronto region reached $910,290 last month, a 17 per cent increase over the previous year.

In the Niagara area, the benchmark selling price has nearly doubled over five years as investors have flocked to the U.S. border region because of the relatively low house prices.

In Montreal, the number of sales hit a record high last year, and Victoria saw the benchmark selling price is up 4 per cent over the past year.

Even in the greater Vancouver area, sales are rebounding dramatically, and the average selling price is starting to rise again after housing policies against overseas property investors slowed activity in 2018.

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