“What impacts are the interest rate having on the market?”

July marked the second consecutive rate drop by the BOC, and there are talks of more to come. Many have asked, "What impacts will this have on real estate?" Typically, lower rates correlate with increased demand, leading to higher real estate prices. This time feels different. These rate decreases are amidst one of the most unaffordable housing markets in Canadian history; unemployment is rising, especially among the youth, mortgage delinquency is climbing, and inventory has reached levels last seen during the Financial Crisis.

It's not all doom and gloom here. We are still seeing real estate move. There is demand in prime neighbourhoods for prime properties and homes priced correctly. In the GTA, Months of Inventory is sitting around 4.4 Months. This would indicate that we are in a 'Buyers Market.' However, if you take a closer look at just Toronto and filter out condos, Months of Inventory is closer to 3.2 Months. You can even narrow that down further based on the neighbourhood. For example, The Beaches is at 1.9 Months of Inventory, more indicative of a Sellers Market. Multiple offers and bid nights remain in key locations and properties.

The condo market is a whole different story. Inventory for active condos in Toronto remains above 6,000 units. This is the highest we have ever experienced in the city. Even with rate drops to come, investors are unable to find positive cash flow for Condos, and with Youth Unemployment reaching Crisis-like levels, there is little lower rates can do to reignite demand. The junior one-bedroom and bachelor units are feeling the impact of the market slow down the most.

So when someone asks, "What impacts will this have on real estate?" the reality is, it depends on what you are looking for.