Today, all eyes were on the Bank of Canada as they announced a 50-basis-point rate cut. While this decision wasn’t a total surprise, the path leading here has been anything but straightforward.
Let’s unpack what happened, what it means for the market, and why this could be a game-changer for real estate investors.
Key Indicators That Shaped the Decision
In mid-November, most economists were betting on a modest 25-basis-point cut. But by last week, after weak jobs data, the odds shifted. Friday’s employment numbers sealed the deal for a larger cut—and here we are.
Key Indicators That Shaped the Decision:
- Inflation: October’s inflation rose to 2%, up from 1.6% in September, initially pushing expectations toward a smaller rate cut.
- GDP: Q3 growth disappointed at 1%—well below the Bank of Canada’s forecast of 1.5%.
- Jobs Report: Canada added 50,000 jobs in November, but 45,000 were public sector roles. Unemployment climbed to 6.8%, and without public sector growth, it would’ve been over 9%.
These numbers highlight an economy under stress, with rising unemployment and minimal private sector job growth. Unsurprisingly, this led to the 5-year Canadian bond yields dropping again, paving the way for this larger cut.
What’s Next for Canada’s Economy?
The outlook isn’t great. A distorted economy, thanks to record immigration and hefty public sector spending, is catching up to us. With inflation no longer a major concern, expect more rate cuts in the coming months—potentially bringing us to 2.5% by summer.
What Real Estate Investors Should Focus On
For real estate, falling rates mean lower borrowing costs. But does that mean you need to pause on making your next move?
If you’re waiting for the perfect moment to invest, here’s the truth: It doesn’t exist. Markets are unpredictable, and Toronto’s real estate isn’t moving in one direction anyway. Condos and multiplexes, for example, are telling completely different stories right now.
Instead of waiting for certainty, focus on opportunities that make sense today:
- Cash Flow Potential: Weak markets and lower rates improve cash flow for rental properties, especially in multiplexes.
- Value-Add Projects: Lower interest rates make renovations or conversions more affordable. This is particularly impactful in Toronto, where higher rents translate to stronger property values.
For example, construction costs may be similar nationwide, but Toronto’s higher rents significantly boost post-renovation value. Projects like building laneway suites or converting single-family homes into multiplexes offer excellent returns when done right.
Why Toronto Still Stands Out
Toronto’s unique market conditions—no parking requirements, no development charges for multiplexes, and strong rental demand—make it a hotspot for value-add projects. Whether you’re thinking of adding a laneway suite, building a garden suite, or converting a property, Toronto offers unparalleled potential for returns.
How We Can Help
At Elevate, we specialize in helping investors navigate Toronto’s real estate market. From finding the right property to managing renovations and leasing, we’re here to support you every step of the way.
Here’s what it’s like to start as a client with us:
- Initial Consultation: We’ll talk with you to understand your needs and teach you how to invest wisely in Toronto real estate.
- Market Search & Purchase: We’ll search the market to find the perfect property for you.
- Renovation Support: If the property needs renovations, our trusted contractors are ready to help, and we’ll coach you as you manage the project.
- Leasing and Management: If you need help renting out and managing your property, our leasing and management team is here for you.
Ready to get started? Click on the link below, and let’s start working together!
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!
