If you’ve come out of housing hibernation and plan on re-starting your search this spring, we have news for you!
According to CityNews, the Bank of Canada has reduced interest rates because of the impact of COVID-19, the teacher lockouts, and the Kahnawake rail blockade. The benchmark rate has dropped from 1.75% to 1.25% and then, decreased further to 0.75%. The Bank of Canada is scheduled to announce its next rate decision on April 15th, and it is believed—at this point—that the benchmark rate will drop even more to 0.25%. Other central banks have also lowered their interest rates.
As per Toronto CityNews on March 4th, GTA housing sales have increased 45.6% since February 2019, specifically:
- The average selling price for detached homes is now $1,184,800.
- The average selling price for condos is about $666,358.
Despite the rise in demand for Toronto housing and the slash in interest rates, buying activity is predicted to slow down this spring and even this summer in part due to social distancing and self-isolation advisories.
A New Mortgage Stress Test?
In February, we were told to expect the benchmark rate used in stress tests to be replaced this coming April because it was deemed inconsistent with the housing market. A new “floor” for the insured and uninsured mortgage stress tests was being designed to give homebuyers a lower minimum qualifying rate and consumers more overall buying power.
However, the Department of Finance has put the changes on hold in light of the current situation with the market.
What to Expect This Spring
According to the CBC, Canada is expected to go into a recession later this year. Although COVID-19 has had a significant impact on the economy, the dip in oil prices has been a contributing factor. It’s predicted that COVID-19’s impact will decline towards the end of the first half of 2020, but if the low oil prices remain where they are, the economy will have a slow recovery.
How a Recession Will Affect the Housing Market
The Financial Post reports that a recession may have buyers thinking twice about taking on large amounts of debt, despite the slashed interest rates. Consequently, sellers are already concerned about their home’s value since it may decrease with fewer buyers looking around.
Additionally, the self-isolation and social distancing advisories are another factor deterring buyers from venturing out to open houses. If sellers are receiving eight or more offers now, they shouldn’t be surprised if they receive only one offer this coming spring and summer. Right now, however, buyers and sellers are still very active. And the internet will play a larger role in real estate transactions, such as presenting offers and signatures, as well as allowing buyers to view virtual tours of the properties as opposed to in-person inspections.
Based on the current numbers, Jason Mercer, the chief housing market analyst of the Toronto Real Estate Board, believes that single-family homes and condo prices will rise as we head into spring. But he and many other forecasters are closely watching the market for any possible changes.
Susan Macarz Is Still Here for You!
During these confusing times, rest assured that Susan is still here to help you with buying and selling in Toronto. She welcomes you to contact her with any questions or concerns you may have and will advise you accordingly. Contact Susan today at 416-219-7583.