Post-BOC Rate Cut Landscape: Scouting for Investment Opportunities in Canada's Real Estate Market

As the Bank of Canada cut its interest rate for the second time in this cycle Wednesday, economists remained confident more reductions are on the horizon.

The central bank referred to the housing market in its statement, stating that household spending, including both consumer purchases and housing, has been weak. So, how will the Bank of Canada rate cut impact the real estate market? Real estate experts have mixed opinions on whether the further reduction in borrowing costs will spur housing market activity.

● Leah Zlatkin, a licensed mortgage broker and LowestRates.ca expert said in a statement that the latest move by the Bank of Canada is “not likely” to “move the housing market in a significant way.”

“We’ve seen a 50-basis point drop since June, but rates are still comparatively high and many potential buyers are waiting for further rate decreases to increase their buying power before they make a move,” she said.

● Penelope Graham, mortgage expert at Ratehub.ca, said in a statement on Wednesday that it “remains to be seen” if the Bank of Canada’s most recent rate cut will incentivize home buyers to re-enter the market amid still-elevated borrowing costs.

“However, we did see a slight uptick in sales as a result of the June rate cut. Today’s decrease could offer new optimism and stoke real estate demand,” she said.

● Karen Yolevski, the COO of Royal LePage Real Estate Services Ltd., said that buyers have been waiting for a “concrete signal” from Canada’s central bank.

“A second cut to the overnight lending rate indicates just that, and with mortgage qualification thresholds continuing to come down, sidelined buyers may have the confidence they need to make their return to the housing market,” Yolevski said.

She added that she expects the rate cut will spur a “slight boost in activity” over the near term, followed by a more significant increase in buyer demand in the fall.

Marcus & Millichap has said it expects additional cuts to stimulate home buyer demand throughout the rest of 2024. “This will coincide with falling residential mortgage rates, alleviating some barriers to homeownership. Potential buyers who currently reside in the rental market could seek ownership opportunities as housing costs ease," said the real estate company.

Source: Financial post, The Motley Fool, Bloomberg