Welcome to our updated September market report. Today, the Bank of Canada announced a significant rate cut that will impact real estate markets as we head into 2025. With the Bank lowering its overnight rate to 3.75% and ongoing global economic shifts, investors, buyers, and sellers need to understand how this will shape the real estate landscape.

Bank of Canada’s Rate Update: What You Need to Know

As of today, the Bank of Canada has reduced its target overnight rate by 50 basis points to 3.75%, citing lower inflation and the need to support economic growth. This marks a significant shift from the previous rate of 4.25%. The central bank also noted that inflation in Canada has dropped from 2.7% in June to 1.6% in September, below its 2% target. With inflation largely under control, the Bank is adopting a more dovish stance, leaving the door open for further rate reductions depending on incoming economic data.

This lower rate is expected to stimulate consumer spending and investment, including in real estate, as borrowing costs decrease. The Bank is projecting moderate GDP growth of 1.2% in 2024 and stronger growth of 2.1% and 2.3% in 2025 and 2026, respectively. This shift is expected to help absorb excess supply in the economy, bringing balance to both inflation and growth.

A Hot Alberta Market Heats Up Further

With the rate cut, Alberta’s real estate market is poised for even more growth. The province has already seen strong price gains and rental increases throughout 2023, and the spring of 2025 is expected to be red-hot. The reduction in borrowing costs will likely increase demand for homes and investment properties, further boosting prices.

The resale market remains competitive, particularly in properties priced under $550,000, where income-generating suites are in high demand. Sellers are benefiting from less competition, and buyers are expected to flood the market as rates continue to decline.

New Construction and Investment: Prime Time for Buyers

The new construction market presents a unique opportunity for investors. With today’s rate cut and more reductions potentially on the horizon, now is the time to lock in 2024 prices for projects closing in 2025. The Bank’s balance sheet normalization and gradual economic recovery could make financing conditions even more favorable. Programs like CMHC’s MLI Select continue to be a driving force behind multifamily investments, offering compelling financing options.

Migration and Housing Demand: Alberta Still Booming

Despite a decrease in housing starts and a slight dip in the resale market, demand for housing in Alberta remains high due to population growth. The province continues to attract both international and interprovincial migrants, increasing the need for rental and for-sale properties. This influx is expected to continue into 2025, sustaining the demand for housing and further fueling price growth.

Is Now the Right Time to Sell?

For those considering selling, today’s rate cut adds an interesting layer to the decision-making process. Sellers could benefit from reduced competition during the colder months, while buyers remain active. However, those who can wait until early 2025 may see even greater demand as more buyers enter the market in response to lower interest rates. Prices are likely to rise, but the rate environment may offer more favorable financing conditions for those looking to buy.

Final Thoughts

With today’s rate cut and the prospect of further reductions, the real estate market is gearing up for an exciting year. Whether you’re a buyer, seller, or investor, the next few months will offer opportunities to capitalize on favorable borrowing conditions. Alberta, in particular, remains a hotspot for investment, with strong price growth and rental demand expected to continue well into 2025.

Stay tuned for more updates as we monitor the evolving market and provide insights on how to navigate these changes.

For those interested in exploring real estate opportunities, our team is here to help. Visit AOFteam.com to schedule a discovery call with one of our expert agents.

https://www.bankofcanada.ca/2024/10/fad-press-release-2024-10-23/