The Art of Transition

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The following article comes directly from my newsletter this month. Benjamin Tal is my favourite economist who I follow and very much recommend.

BoC rate hike: What does CIBC's Tal think will happen next?

A busy spring is still in the cards for Canada’s housing market despite the Bank of Canada’s decision to hike its policy rate, according to a prominent economist – with any significant change only likely to be noted in the second half of 2022.

Benjamin Tal, deputy chief economist at CIBC World Markets, told Canadian Mortgage Professional that he anticipated a return to a more normal market towards the end of the year, but that the Bank’s 0.25% rate increase on Wednesday likely wouldn’t slow down activity in the short-term.

“I think the [biggest] impact will be felt in the second half of the year. In fact, I still expect a relatively strong spring as people enter the market before rates start rising in a more significant way,” he said.
“Then I see a situation in which the market will relax, [and] people will move back to fixed as opposed to variable rates. Now, variable accounts for about 50% of origination – that will go back to normal.”
The Bank’s decision to raise its benchmark rate by a quarter point, to 0.5%, marked its first rate change for nearly two years, and the first hike since 2018.

Tal said that while some observers might view it as a “hawkish” statement from the Bank, it was a relatively unsurprising announcement, particularly as the central bank had already indicated in its January release that rate increases were on the way.
The evolving crisis in Ukraine, where Russian forces have launched a savage assault in the past week, was cited by the Bank as a “major new source of uncertainty” that’s seen spikes in prices for oil and other commodities, with the potential to negatively impact global economic growth.

Could that give the Bank pause for thought about its intentions for further rate increases down the line in 2022? It’s unlikely, said Tal, although not impossible in the case of a major and unforeseen event.

“It was interesting to hear what they have to say about the situation in Ukraine,” he said. “The question is whether or not it’s a recessionary event or inflationary.

“I think the Bank of Canada is going to look at it as more inflationary, and therefore unless something really bad happens, like a cyberattack or something, there’s no reason for them to deviate from the plan to raise interest rates.”

The Bank welcomed some positive economic news in Wednesday’s announcement, noting that Canada’s economic growth had surpassed its expectations in the fourth quarter of 2022 and reinforcing its view that slack has been absorbed in the country’s economy.

While it said the recovery from Omicron-induced setbacks was well underway, it also emphasized that consumer price index (CPI) inflation remained well above its target, with inflation expected to be higher in the near term than initially expected.

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Convenience of a Condo – comfort of a house! 🌇

A Toronto couple approaching retirement decided it was time to “get out of Dodge” and began looking in areas within one to two hours of the GTA where they could pursue a quieter yet fulfilling life with amenities and lifestyle attractions. They settled on the Niagara area. After an exhaustive search they found and put a down payment on a not yet built bungalow townhouse in a modestly sized project. 😊

This project is part of a growing trend where the townhouse itself is freehold and the common areas are condominium. Known as a vacant land condominium, it features the best of both worlds. Not only are the lawns cut and the snow cleared, there are strict rules concerning property standards, ensuring that all the homes in the project are maintained to a consistently high standard. This results in not only a beautiful appearance with pride of ownership on full display, it also maintains property values. There are associated fees, but these are quite modest. 👍

The project was completed in just over one year. 👏 In general, these types of homes offer a wide choice of builder selections for flooring, fixtures, counters, etc. Our couple chose additional available upgrades including gas fireplace, a bathroom in the lower level and a heated floor in the primary bedroom ensuite bathroom. The upgrade total was about $30,000. Appliance packages and window treatments are extra.

The move also turned out to be quite a windfall as well, as 3 months after taking possession, an identical unit in the complex sold for significantly more than the original purchase price. The bungalow model has proven to be very much in demand by the boomer generation. Even with the increased prices there are still opportunities for downsizing Toronto boomers as the values of their Toronto homes have increased as well – leaving cash in their pockets after the process is complete.

Developers are answering the demands of the Baby Boomers, not only throughout the Niagara region, but these builds are also popping up in the very popular Prince Edward County and east from Durham along the 401 corridor.

For more info contact:⁠
Luci 📲 [416.930.8427]⁠
or book an appt: Torontoloftcondos.com
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#2022