In a major push to the real estate market in Canada, the Bank of Canada has recently cut rates of interest on mortgages. Lower rates of mortgages are expected to offset any major lag in the housing market owing to the widespread impact of the coronavirus epidemic. Lower traveling of investors from China may slightly impact sales volumes in Vancouver and there are market fluctuations that are a source of concern. Yet, the cuts in interest rates courtesy the Bank of Canada will spur further declines in actual market rates and attract more buyers to the Canadian housing market.
According to experts, most home buyers are not concerned regarding coronavirus and recessionary factors in the market. The only thing that most people worry about is the purchase of a home and if they do not buy in the current scenario, then the overall purchase may get way costlier in the near future. Several market factors are spurring possibilities of a favorable season for property purchases. Lower yields in bonds in the current scenario have prompted banks in Canada to offer attractive mortgages and the Government has also made some pro-active changes in its mortgage qualification regulations. Markets have already started factoring in the cut in rates of interest by the Bank of Canada in order to cushion the economy.
Key aspects worth keeping in mind
The cut in mortgage rates may be as high as 50 basis points as per reports. This could be great news for the Canadian property market which is now anticipating a rush of buyers in the next few months. Lower mortgage rates positively impact housing sales and this should be a widespread phenomenon throughout the nation as per reports. Home prices have already started rising across Canada’s major cities post the market slump throughout the last couple of years. Reducing supply of units in Toronto has already driven prices to their highest possible levels in more than 24 months in January, 2020. Sales were higher by 40% this February as compared to the year-ago period as well.
Some Canadian markets are witnessing record pricing highs and bidding wars are becoming commoner as per reports. With a cut in mortgage rates, demand is likely to go up even further. Some rates for mortgages were cut by the Royal Bank of Canada by end-January, 2020 and HSBC Holdings Plc’s division in Canada started providing 3-year fixed rate mortgages at 1.9%5 while reducing the 5-year fixed rate by 30 basis points for uninsured mortgages. This currently stands at 2.49%. Owing to the stronger housing market in Canada currently, lenders will start offering more competitive rates in the near future and this should keep the growth momentum going. Several market players have already reported slight impact on buying activity in cities like Vancouver which are hot favorites with Chinese investors owing to lower travel volumes so far this year.
Chinese buyers are not flying for vacations to Canada for celebrating the Chinese New Year and hence decisions related to buying property are being put on hold. 50% of Asian buyers interested in coming to Vancouver for purchasing real estate, have put their decisions on hold and this has impacted sales figures in this particular city as per studies. However, other home buyers are making up for this decline and how! Vancouver’s sales figures for homes increased by a whopping 45% last month as compared to the year-ago period and prices went up by 0.3% as per reports released by the Real Estate Board of Greater Vancouver. Some experts also feel that several property buyers from China may be further incentivized to buy homes in Canada owing to fears of future outbreaks of similar viruses. All in all, the market remains extremely busy and will continue to remain so in the near future as per reports.