30 Jun July interest rate hike in focus
This has been a slow week for new listings with the Canada Day long weekend upon us. In general, June has been slower than expected with very few new listings, which is keeping inventory tight. As such, the market for semi-detached and detached homes is where I am seeing most upwards pressure. As I have mentioned before, this is in-part because condo prices skyrocketed over the last year, while freehold homes depreciated. Move-up buyers have been taking advantage of the equity in their condo to buy a house, a smart move in my opinion.
In terms of economics, my focus right now is on the July interest rate decision. While I don’t expect an interest rate hike to have an immediate material affect, I do believe an interest rate hike would put pressure on the high-rise condo market. I specify high-rise because of the large proportion of investor owned units. Many condo investors who recently purchased have been renting their units at a loss, banking on the appreciation for a future return.
As higher interest rates and tighter mortgage restrictions take affect, condo appreciation is slowing, just as the cost of ownership is rising. It may not be long before many investors decide it is time to cash out. Many owner-occupiers of condos are already cashing out to buy a house. Investors in dense neighbourhoods such as Cityplace and Liberty Village would be advised to take a hard look at their ROI expectations moving forward.
Nick, June 29, 2018.