There’s More To Rising Interest Rates Than Just A ‘Buyer’s Market’

If there was any doubt the GTA has become a buyer’s market for residential real estate, that doubt may be diminishing further. The Bank of Canada has announced yet another interest rate hike, this time by 25-basis points, with the overnight rate now sitting at 4.50%. Many economists had been predicting an increase double that. And this rather 'modest' jump could be a sign that the central bank believes things are trending in the right direction.

However, consider that the sale-to-list price ratio turned negative in July after an 18-month positive run, and has dipped every month since, bottoming out at minus-2 percent in January. To be clear, this means that the average buyer is paying 2-percent less than the asking price on a property. At this time last year, buyers were paying nearly 15 percent more. Now that’s what you’d call a market swing! However, while buyers have the advantage, they aren’t dominating the market the way sellers were at the same time last year.

Despite that, there is some good news for sellers. For one thing, inflation dipped from 6.8 percent in November to 6.3 percent in December, which signals that the worst may be behind us, and that further rate hikes may not be on the horizon. Time will tell.

But for buyers, telling them “it’s a good time to buy” is extremely simplistic advice. Here, three Strata agents offer their observations and insights on the current state of the market.

Milan Mitrovic | Realtor, Strata.ca

“The majority of buyers who were on the fringe of being able to afford a new home with a mortgage have declined drastically over the past few months. From my discussions with a number of clients, many are waiting until 2024 to see what’s going to happen with housing prices as well as interest rates.”

“The majority of active buyers are people who are cash-heavy, and primarily looking to purchase investment properties. These people know that real estate should not be viewed as a short-term investment.”

“This is the ideal time to buy if you are cash-heavy, as prices are relatively low compared to previous years, while at the same time, rent is at an all-time high.”

Apurva Mudliar | Realtor, Strata.ca

“In my circle, I'm seeing that people are motivated to close on deals because they have locked-in mortgage rates from 2022. Once the BoC’s rate increases stop, the market could potentially bounce back. This is why some people want to take advantage of their locked-in rates and benefit from lower property prices today.”

Osman Omaid | Realtor, Strata.ca

“This interest hike may curb demand just long enough to offer one last solid window to get into the market, without a ton of competition.”

“Another interest hike would actually be nice to curb the rapid rise in demand.”

“After so many hikes, I think rising rates have lost their potency on buyer demand. It’s important for buyers to time their purchase with the low tide of demand. It’s also crucial for sellers to catch the high tide when looking to list their property.”