The Bank of Canada announced on June 5, 2024, that it is lowering the key interest rate by 25 basis points to 4.75%. Following this announcement, the Canadian currency remained stable against the US dollar. This rate cut could have several significant effects on the real estate market and the Canadian currency:
- **Opportunity for Buyers**: Lower borrowing rates will likely make mortgages more affordable, stimulating demand and encouraging new real estate purchases and investments.
- **Increase in Property Prices**: Increased demand can lead to a rise in property prices, allowing sellers to benefit from renewed interest in the market.
- **Attraction for International Buyers**: A rate cut can make the Canadian real estate market more attractive to non-residents, especially if the Canadian currency weakens, offering advantageous investment opportunities.
- **Exemptions to the Canadian Moratorium**: Despite the moratorium on purchases by non-residents, there are exemptions for foreign students, temporary workers, refugees, and properties outside major metropolitan areas.
- **Impact on the Canadian Currency**: Since financial markets are efficient, a rate cut in Canada may already be anticipated, reducing its impact on the Canadian currency compared to the US dollar.
- **Reduction in Capitalization Rates for Income Properties**: The decrease in interest rates can reduce the capitalization rates for income properties, leading to a rise in prices in this sector, which has experienced value declines.
In conclusion, a rate cut can offer significant opportunities for the real estate market. However, it is crucial to stay informed and manage investments proactively to maximize benefits and minimize risks.
For any questions or personalized advice, the Profusion Immobilier team is at your disposal.