How Can Interest Rates Have an Impact on Buying a Property?
With interest rates going up and down, bubbles forming and popping, it’s hard to determine how interest rates impact buying a property. However it is obvious that as interest rates increase, ability to buy a property decreases, as mortgage rates go up. To understand how this happens it is important to understand how the market works and how people respond to how it works as well.
In Toronto, we have a huge condo market that goes up and down, is hot and cold, and is reflective of the increase and decrease of interest rates. Most homeowner pay attention to the changes that are noticeable in mortgage rates, as that is where they are directly impacted. But, on top of the impact that interest rates have on mortgages, the availability to develop new properties also is impacted. So availability is somewhat limited – if you want to go as far as that. Or as you can sometimes see, projects start to slow down, or stop entirely due to money issues.
The most common help misconception is that as interest rates go up, housing prices will go down. While this should be the most logical assumption, based on the past 30 years in the Canadian housing market (according to statistics Canada) housing prices have not had a direct correlation to the increasing mortgage rates. Prices of houses have not gone down, nor have buyers been forced out of the market. If anything, housing prices have steadily increased over time, and especially after mortgage rates have increased.
So what does this mean when you purchase a property? Should you wait until interest rates are lower, and mortgages are stable in order to invest? Honestly I don’t think so. Increasing interest rates have a history and they just don’t increase overnight, and for no reason. Generally we can assume that when the interest rates increase, salaries and income also increases which allows for greater ability for purchasing power. The standard of living generally is on the rise, and this affects everything from buying gas and milk to purchasing a property. The increase isn’t noticeable in general terms, as everything has increased – so it is relative.
What we do need to consider is that there is a lot of talk, a lot of chatter about bubbles busting, things hitting the fan and everything going awry. As potential homeowners, you need to be able to calculate the risk at the time of purchasing. You need to understand fully what you are signing up for, and what implications increasing, or decreasing interest rates may have on your property, or your overall ability to purchase a property. Playing the waiting game isn’t always the best game to play.
TorontoCondosVIP can help you make the right decisions when it comes to purchasing a pre construction condo. We have the right contacts, and tools that can facilitate your decisions – not to mention we know where they hidden deals are and how to get the most for your money. Whether you are from Canada or not, let us help you build the condo of your dreams.
Whether you are a first time buyer, or a seasoned buyer, I can help you understand the current market situation, and the future outlook, and what that means for you. The condo market in Toronto is booming, and preconstruction condos are always something that is worthy of an investment. Contact me today and let’s chat!
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Sherry Dabir is a real estate broker with HomeLife, and specializes in Pre Construction Condos within the GTA. She is currently ranked in the top 5% in Canada and has exclusive VIP access to and experience with Pre Construction Condo projects. Contact her today to learn more.
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Tel # 416 417 2400
Website: TorontoCondosVIP.com
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