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#1 Some Interest Rate Relief…at Last

In its June 2024 rate announcement, the Bank of Canada (BoC) decreased the benchmark rate by 0.25% and signaled that further rate cuts are on the horizon if inflation continues to show signs of stabilization. 

When the BoC started increasing interest rates post-COVID, nobody expected them to go as high as they did or stay high for as long as they have. Today’s announcement was welcome news after almost a year at 5%.

So what does it mean? 

  • Increased activity in Toronto’s real estate market. We know buyers have been watching and waiting – listing views on realtor.ca and on our website have been at record levels without a corresponding increase in showings – a clear sign at BREL of pent-up demand. Mortgages are still expensive, though, so we expect a more gradual recovery over the next 6-12 months.  
  • If you have a variable-rate mortgage or line of credit (HELOC), you’ll get instant rate relief. For every $100,000 of mortgage, your monthly payment will decrease by $15. 
  • With lower rates, buyers can qualify for more mortgage, easing some pressure. Make sure to talk to your bank or mortgage broker to update your qualification.
  • Investors aren’t likely to get too excited yet. It’s not a big enough cut to bring them back to the market. 

#2: The Triple Threat: May 2024 Real Estate Stats 

The GTA real estate statistics for May 2024 paint a picture of the dreaded triple threat. Compared to May 2023 statistics:

  1. Sales volume 21.7% (less demand)
  2. New listings 21% (more supply)
  3. Average price 2.5%

But, of course, that’s not the whole story. When we look at the May 2024 stats for the City of Toronto (excluding the 905 regions), we see that, compared to May 2023:

  1. Sales volume 17%
  2. New listings 28% 
  3. Prices were actually flat, with the average decreasing by only $3,819 year-over-year. Compared to last month, the average price increased by $41,002.

There are now more condos listed for sale than ever before – likely a result of 2 things:

  • Investors trying to sell before the changes to capital gains taxes (see the next section) 
  • Condo sellers anticipating a June rate decrease and expecting more first-time buyers to enter the market.

These stats would normally keep us up at night, but with the BoC dropping the benchmark rate, we expect to see significant month-over-month improvements throughout the summer months. 

#3: Changes to Capital Gains Taxes Coming This Month

June 25, 2024, ushers in harsher capital gains taxes for real estate investors. Investors with more than $250,000 in capital gains will see the inclusion rate rise from 50% to 67%. 

Remember: A capital gain is the difference between the sale price and the purchase price, minus costs. In Canada, we don’t pay capital gains taxes on our primary residences, so this change only affects investors or people with cottages or second homes.

Example: You purchased a property for $100,000 and sold it for $500,000:

Before June 25, 2024: Your capital gain is $400,000, and you would be taxed on 50% of it, or $200,000. If you were in a 50% income tax bracket, you’d pay $100,000 in capital gains tax. 

After June 25, 2024: Because your capital gain is higher than $250,000, you would be taxed at 50% on the first $250,000 and 67% on the remaining $150,000. Assuming once again that you’re in a 50% income tax bracket, you’d pay the following capital gains taxes: $62,500+ $50,250 = $112,750, or $12,750 more.

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