Introduction
Let’s dive into something crazy happening in the real estate market right now.
We’re seeing both Toronto real estate prices and interest rates coming down at the same time. That’s right— the Bank of Canada cut interest rates by 25 basis points in June and another 25 basis points in July, earlier and more than expected back in the spring.
It’s a bit strange, and when things seem off, there could be an opportunity. Stick around, and let’s dive into this a bit more.
Relationship Between Interest Rates And Real Estate Prices
Normally, when interest rates go down, prices go up, and vice versa. That’s just economics.
We saw this happen at the end of 2023 when fixed rates started dropping. Three-year fixed rates went from 6% to around 5%. Demand picked up, and prices eventually shot up 15% by May of this year.
But as you can see, there’s a bit of a delay because real estate isn’t as efficient as the stock market. We’re dealing with individual properties, limited buyers and sellers, and seasonal factors too.
The Summer Toronto Real Estate Slump 2024
So, what’s going on right now? We’re in this weird summer slump. Buyers are on vacation, and sellers who’ve been holding out for two years are finally listing their properties because rates are coming down.
More supply, less demand—this is why prices are dipping even though rates are dropping below 5% lately with the recent rate cuts.
Lower prices drive up rent yields, and with lower interest rates, cash flows have jumped quite a lot. We’re talking $1,000+ in monthly cash flows with many deals in this summer market.
But remember, real estate reactions are delayed, so it could be a matter of time before prices start creeping up again as investors catch on.
Timing the Market: A Caution
If you’re thinking you can time the market perfectly and snag a property at rock bottom prices, let me stop you right there.
Don’t even try it. You know how many people actually nail the timing? Not many.
Also, if you’re planning to flip a property in a few months or even a couple of years, you’re taking on a massive risk to get the timing of both the buy and the sell right. By the time you factor in taxes and fees, which add up to around 10%, you’d need at least that in gains just to break even. Not worth it in our opinion!
Instead, focus on fundamentals. Right now, we’re seeing price points that match what we saw when interest rates were much higher at 6% and everyone was freaking out about where rates were headed.
But now? Rates are lower, and it looks like they’re trending down according to our Canadian big banks. So realistically, there’s probably not much room left for prices to keep falling.
Building Wealth in Real Estate
Here’s the real secret to building wealth in real estate: make sure the math checks out. Don’t try to get rich quick; focus on the long game.
That’s why we love multiplexes in Toronto. They give you better rents and positive cash flows with more diversified income streams than condos or single-family homes.
And if you really want to boost your returns, look for value-add opportunities. Buy a single-family home and convert it into a multiplex, or snag a fixer-upper and renovate it. If your finished value is more than what you put in, this is another reliable way to make money with real estate.
Honestly, all of this is possible in any market. But right now, we’re in an in-between time where rates have dropped and prices haven’t adjusted up yet, so rent yields and cash flows are looking better than ever. And with a softer market, you might even score a better deal for your value-add projects soon.
How We Can Help
Our Toronto real estate sales brokerage specializes in buying and selling investment properties across the city, particularly houses and multiplexes. We can help you:
- Assess your situation
- Teach you how to identify good investments
- Find the perfect property for your goals
- Connect you with reliable contractors for renovations
- Coach you through project management
- Handle property rental and management
Ready to dive into Toronto multiplexes? Let’s chat and explore these lucrative opportunities 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!
