Bank of Canada Finally Cuts Interest Rates! What Does This Mean for Toronto Real Estate?

This week’s rate decision was a big one because all eyes were on Bank of Canada’ rate decision and they finally dropped rates after over four years. 

Add that to our soft housing market and you might be wondering what all of this means for Toronto real estate. 

Well, stick around – let’s dive in!

Recent Toronto Housing Market Trends

The Toronto real estate is softer these days but it’s not because no one’s buying. In fact, buying levels have been steady since mid-2022 and have started to climb since early 2024. 

The big reason for the soft market is the flood of listings lately. Sellers who were holding off for the past two years are now finally selling so this boost in extra supply is what’s giving buyers a lot more options these days.

Even with growing demand, we’re still not in a normal market – there’s definitely buyers still on the sidelines. But demand will gradually recover when rates start to come down. When you add this to the backlog of supply getting cleared – that’s a recipe that will keep the market warm.

One thing to note is that not all Toronto properties will move in the same direction. We’re expecting Toronto condos to be weaker from condo completions getting added to the supply. Toronto houses will always have limited new supply because of lack of land – so it’s going to be more competitive with houses.

But that’s not all – we’re also seeing a lot more interest from investors looking to buy houses, thanks to Toronto’s new multiplex-friendly housing policies. So, with faster growing demand and limited supply for Toronto houses, we’re expecting the price gap between houses and condos to continue to widen.

Impact Of Falling Interest Rate On Toronto Real Estate

Then there’s the trend of falling interest rates. Just two weeks ago, expectations for a Bank of Canada rate cut in June were under 50%. But then, inflation numbers came out lower than expected, pushing expectations up to 60%. Last Friday, weak GDP data bumped that up to 80%. 

And it came true – rates fell by 25 basis points today and likely continue to trend down slowly from here.

But here’s a better question. Will a 25 bps rate cut by the Bank of Canada actually cause a housing boom again?

When it comes to affordability, we don’t expect a major shift. Each 25 basis point cut  only boosts purchasing power by 2.5% for variable mortgages. And with variable mortgages making up for less than 10% of all mortgages, and fixed rates have already factored in rate cuts, the price bump from a math standpoint is probably less than 2.5%.

Is It A Good Time To Invest In Toronto Real Estate?

At the end of the day, what will really matter is when see more confidence in the market – boosting demand even more. 

This combined with fewer condo completions later on with less construction starts over the past couple years will help to balance out the current weak condo market. This will also shift the balanced house market to favour sellers more.

So, if your question is, “is it a good time to invest in Toronto real estate right now”? Let’s break it down:

  1. Are you getting net rental income? This needs to be a yes.
  2. Are you thinking of holding onto your property for at least 5 years? This should be yes, because there could short term price drops that you need to wait out although the risk is lower than a couple years ago because interest rates are trending down.
  3. Can you cover all of your outgoing monthly payments with rent? This should also yes, so that you can stomach the short term price drops and hang on.
  4. Will prices go up in the long run? This is, of course, the most subjective but we’d say yes – especially in the Toronto freehold space. Falling interest rates, a housing crisis with limited new supply, and multiplex-friendly housing policy all make a strong case for supporting the Toronto housing market, making it a solid investment with great risk-adjusted returns.

How We Can Help

And if you’re ready to invest in Toronto real estate and want a brokerage to help you make more fact-based decisions, you’re in the right place!

We focus on buying and selling freehold investment properties in Toronto. Whether you’re interested in a multiplex that’s ready to rent or need guidance on turning single-family homes into multiplexes, we’re here to help. 

We’ll start by understanding your situation, teach you the basics, and then help you find the best Toronto real estate investment for your goals.

Ready to get started? Just hit the link below and book a free call with us!

What Toronto Real Estate Investment Is Right For You?​

Check out our complete Toronto real estate investment guide for all the details and real-life examples. If you’re ready to dive in, just book a call with us!