The Bank of Canada has already cut interest rates three times this year in 2024, and more cuts seem likely. In this post, we’ll break down what’s happening and how it might impact the Toronto real estate market!
Recent Rate Cuts: What’s Happened So Far?
- Back in June, the Bank of Canada dropped the overnight rate from 5% to 4.75%.
- Then in July, it dipped again to 4.50%.
- As of September 2024, we’re now at 4.25%.
These cuts were largely driven by weaker inflation numbers, with July’s CPI falling to 2.5%—the closest we’ve come to the Bank’s 2% target in a long time.
The Soft Landing Dilemma
While lower inflation is a positive sign, it’s also raising concerns about whether the economy can achieve what’s known as a “soft landing.” We’ve seen monthly GDP growth turn negative, and the labour market seems to be weakening, adding to these worries.
Given these economic challenges, it’s likely that we’ll see even more rate cuts. Major banks are predicting two more cuts before the end of the year—in October and December. If these cuts happen, the rate could drop to 3.75% by the end of 2024, marking the lowest level since December 2022.
Impact on the Toronto Real Estate Market
So far, these rate cuts haven’t had a huge impact on the Toronto real estate market.
Throughout the summer, Toronto has been in a buyer’s market, with more listings than sales, which has pushed down prices for semi-detached and detached houses. However, with rates expected to drop further, we could see the Toronto housing market heat up this fall.
Generally, real estate prices tend to move in the opposite direction of interest rates. With the possibility of five rate cuts within a year, that could significantly increase purchasing power—potentially by about 15%.
Why Now Might Be the Time for Investors to Take Action
Lower rates might also encourage investors who have money tied up in GICs to start looking for better returns. Real estate often becomes an attractive option in this scenario, especially when prices are expected to rise as rates fall.
There’s more upside in real estate now compared to a year or two ago, but given how volatile rates have been, trying to time the market or bet on short-term price gains isn’t the best strategy.
Focus on Long-Term Gains and Cash Flow
We still believe that holding onto real estate for the long term and focusing on rental income is the way to go. To make that easier, look for investments that at least break even on cash flow—and that’s possible in today’s market.
For example, our team’s deal of the week is a semi-detached home listed for under $900K, with no offer date. It needs about $100K of work, but once that’s done, you could be cash flow positive by close to $2,500 a month.
How To Invest In A Solid Real Estate Opportunity In Toronto
At the end of the day, a cash-flowing property in a strong, long-term market like Toronto can be a solid investment, regardless of short-term price fluctuations. And if rates continue to drop, prices might bounce back up, giving you an added bonus.
How We Can Help
If you’re considering investing in a multiplex in Toronto, we’re here to help! Whether you’re looking for a ready-to-go multiplex or thinking about converting a single-family home, we can guide you through the process.
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: 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!
