With the exception of your friendly neighbourhood real estate agent, the market isn’t generally at the forefront of people’s minds when we are enjoying steamy summer weather. That’s especially true now that the world has opened up and we are travelling again.
There is definitely a summer slowdown happening with fewer showings being booked and properties sitting on the market for longer. It’s nothing unusual. The housing market has also slowed from the spring peak, but that’s more of a seasonal adjustment. It may be coincidental but the drop in activity started when the most recent rate hike was announced, which also coincided with the end of the spring season. Speculations about rate hikes always result in potential buyers being in a “wait and see” frame of mind, and the rumblings about another hike in September, have kept activity low.
What is unusual is that, despite buyer hesitancy, I am seeing more listings coming onto the market at a time when traditionally, there are fewer new listings. I think that people were shaken by the latest rate hike and are thinking ‘Jeepers, I better sell now before the next rate increase comes.”
Unfortunately, that rate hike is already being talked about, so they are probably too late to capitalize.
Condo sales are up considerably compared to 2022, with an average price decrease of $25,000. Whether the trend toward lower prices continues remains to be seen. Despite higher mortgage payments, people are not yet highly motivated to sell. Of course, that could change in the next year or so when people who took out a mortgage in 2020 at 2.5% are faced with a renewal at 6.19%. For reference, that rate difference would add about $1,000 per month to a $500,000 mortgage.
Regardless of whether the Bank of Canada raises interest rates, I think we’ll be in for a slower fall. Inflation is hitting all sectors, which makes the cost of living higher across the board. Even a small percentage increase has a big impact on monthly payments and budgeting.
That said, part of my job is to identify where the opportunities are. It is a good time to be considering investing in an income property, especially if you have cash on hand. Don’t let anyone try to make you believe differently. One thing to keep in mind is that to break even, you’d have to put down about 50% of the purchase price. Even with rents as high as they are, which is about $2500 for the average one-bedroom apartment and $3200 for the average two-bedroom unit, it’s difficult to make the numbers make sense with only 10-20% down.
Will there be deals to be had? Right now, I’m not seeing many people eager to sell but, as mortgages come up for renewal, there could be some flexibility when it comes to pricing. I certainly don’t think there will be a major price drop but considering the emotionality & impulsivity around some people’s money related, decision making, there definitely could be some good entry points for investors who are poised for action.
Eventually over the years, interest rates will come down and you’ll make money on your investment when you sell it. Here’s a guide to investment properties I wrote in 2021, and one on financing.
If you’re interested in gaining further knowledge about investment properties, please get in touch.
