If you haven’t heard, the Bank of Canada dropped a surprise bombshell by cutting its interest rate. This surprise news caught many people off guard, and it has created a whole new bought of speculation about what will happen to the Toronto housing market.
Welcome to the first edition of the Toronto Housing Market Examiner, brought to you by the law firm of Park & Jung LLP, your Toronto real estate lawyers. My name is Simon Park, and I’m the managing partner of Park & Jung. Our mission with the Toronto Housing Market Examiner is to bring meaningful perspective and insight on what’s happening in the Toronto housing market today. For links to all of the articles we mention, make sure to visit our website at www.parkandjung.com. Let’s get started.
The funny thing is that the year began with predictions about the potential cooling of the housing market in general. There were concerns that the market had peaked, and that the Bank of Canada would raise interest rates. This, in turn, would put the brakes on house prices.
Then came ominous signs from the West with the plunge in oil prices. A slowdown in the oil sector would hit Alberta’s economy very hard, but its effects on Ontario is uncertain. While the once red-hot Calgary market might get hit hard, some actually predicted that the Toronto market would increase. One uncertainty was how dropping oil prices would affect jobs and the economy in the rest of the country.
Well, we got one indicator. The influential Bank of Canada was concerned enough about its effects that it made a surprise cut to its prime lending rate, from 1% to 0.75%. This drove off a frenzy of opinions and speculations from the pundits.
- Reuters came out with an article titled: “Canada rate cut keeps housing party going”. You can tell the premise of that article. In it, they quote a realtor who believes that “this means everyone is going to get back in the saddle and we’re going off to the races again”. Some believe that this cut will boost short term demand for mortgages
Will that keep happening in Toronto and surrounding areas? We have yet to see. What’s certain is that house prices in Toronto have shown no signs of abating, especially for highly coveted low-rise housing such as detached houses and townhouses. It just seems that demand for this type of housing is insatiable.
What’s my take on this? Now, I’m no economist or market expert, so all I can do is speak as a person and a cautious lawyer. A home is a place we live. It’s a highly emotional decision. Often, these emotions make us do crazy things. The important thing to remember is to not get carried away by the frenzied speculation. Remember, it’s the media’s job to create excitement and readership.
One concern we do have is what effect plunging oil prices will have on jobs here in Toronto. To me, what’s important is the health of our local economy. Are we producing enough jobs, and jobs that pay decent salaries? That is the ultimate barometer of a healthy housing market. If we don’t have a strong job base, then ultimately the housing market will suffer.
My concern is whether a slowdown in Alberta will affect jobs and wages here in the Toronto area. This depends on how interlinked our local economy is to the West. And that I’m not an expert in. It’s something I’ll have to delve more into in future episodes.
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Park & Jung LLP is your law firm for all your residential real estate needs. Thank you for joining us, and I hope to see you on the next episode of the Toronto Housing Market Examiner.