I know, you clicked on this blog hoping that I was going to say that in the midst of the hot summer heat, prices in Toronto are decreasing.
Alas, that is not the case. In fact, the market remains as buoyant as ever with bidding wars taking place nightly. Inventory is lower than its usual low levels, Buyers are as eager as ever and Toronto real estate agents who thought they’d get some cottage time this summer are accepting the reality that the Toronto real estate market isn’t taking a break anytime soon.
But…there are two interesting economic factors at play that have made Toronto an even better than usual real estate investment:
1. If you’re buying with US dollars, Toronto just got a whole lot cheaper. As the Canadian dollar continues to slide ($0.77 to the US dollar as of writing), an incredible real estate opportunity has presented itself to foreign buyers. Buyers with US dollars can buy a whole lot more house for their money today than they could have just a few short years ago. In order to really understand the opportunity, you need to understand what’s been happening to exchange rates:
- July 2015 – $0.77 US bought 1 CDN dollar
- July 2014 – $0.93 US bought 1 CDN dollar
- July 2013 – $0.97 US bought 1 CDN dollar
- July 2012 – $1 US bought 1 CDN dollar
The US dollar is 23% more powerful than it was just 3 years ago. And with that, the Canadian real estate market just got 23% cheaper if you’re buying with American dollars.
Of course real estate has appreciated a lot in the last 3 years. According to the Toronto Real Estate Board:
- The detached house you could buy for $800,000 in June 2013 now costs $1,040,000 (29% increase)
- The semi-detached house you could buy for $600,000 in June 2013 now costs $780,000 (29% increase)
- The condo you could buy for $350,000 in June 2013 now costs $420,000 (20% increase)
But if you are investing in that Toronto property with US dollars:
- That $800,000 detached house that you would have paid $800,000 US for in 2013 now costs $800,800 US
- That $600,000 semi-detached house that you would have paid $600,000 US for in 2013 now costs $600,600
- That condo you would have paid $350,000 US for in 2013 now costs $323,400
So if you’re a Buyer with American dollars, the exchange rate fluctuations mean you can buy a Toronto property in 2015 at 2013 prices. The descent of the Canadian dollar has essentially wiped out 3 years of price increases for Buyers with US dollars.
[Note to Brendan: do you remember when I was on a mission to convince you to buy American dollars a few years ago? I really wish you had listened to your wife.]
2. Interest rates have gone down again. Despite what many economists expected, the Bank of Canada reduced its prime interest rate again last week, by 0.25%. Banks responded by dropping their rates too, translating to a 0.15% decrease for variable rate borrowers. It’s too soon to tell if this will fuel the fire in Toronto’s already hot real estate market, but if you’re a Buyer looking to get into the market or are looking to upgrade your current home, now is a good time!
If you’re a foreign investor and want to take advantage of the exchange rate and get into Toronto’s hot property market, make sure to read our Non-Resident Guide for Buyers with all the details on financing, insurance and taxes. Still have questions? Don’t be afraid to get in touch….we help a lot of non-residents and we know the drill.
