Foreign Buyers Have no Interest in the Canada Real Estate Market
Interest Rates are rising.
The Toronto real estate market is ‘imploding’.
RBC is cutting 450 jobs.
Foreign investors ignoring Canada, Edmonton & Montreal Real Estate Markets.
What does all of this have in common?
These are headlines from various articles from around the web. The two most important though are the rising interest rates and the foreign investors ignoring us.
First, rising interest rates.
The Bank of Canada looks 18-24 months in advance at various aspects of the Canadian economy and makes projections or estimations based on the data that they collect.
The fact that they are looking to raise interest rates is actually good. It means they feel that our economy can handle a small rise in the overnight lending rates.
As a caveat to that, if oil prices continue to soften, we likely won’t see or hear anymore ‘hawkish’ talk coming from Poloz, the BoC governor.
Now, don’t panic.
Rates in Canada have a tendency to rise by .25% or 25 basis points. This means that the overnight lending rate at the BoC would come to .75%.
To give you some context, 10 years ago the best 5 year fixed rate was 5.7%. The BoC overnight lending rate was 4.25% in June of 2007. Over the course of 2008, the overnight lending rate dropped to 1.5%.
Because their analysts could see what was coming over the next couple of years. They knew that the economy was going to need stimulating.
For rates to get back to those numbers we would have to see consecutive increases by .25% for the next 15 quarters.
That’s 5 years.
If you don’t like the rollercoaster ride and are on a variable interest rate, maybe have a talk with your mortgage broker about locking in over the next few years.
No Foreign Buyers: Who cares
A recent article in the Globe and Mail suggested that the Asian buyer (that was accused of driving prices up in Vancouver and Toronto…not true, btw.) is not interested in our market.
The governments of BC and Ontario were looking for a scapegoat to blame for the falling inventory (lack of supply) and the increased demand for housing in their two major centres in Vancouver and Toronto.
According to TREB and Teranet, approximately 2% of all MLS sales were attributed to foreign buyers in the Toronto market in 2016.
This is a market that saw 113,000 sales last year. This would be a total of 2260 sales.
That number doesn’t even come close to shorting the supply to a level that we could attribute a mass amount of blame onto one segment of the buying market.
If we had those same stats, our supply wouldn’t drop. Our demand wouldn’t be increased, therefore, our prices would not rise by 30% year over year.
No foreign buyers? Who cares.