How will rising interest rates impact buyers?

by Jennifer Paterson29 Dec 2014
Most economists agree that interest rates will rise in 2015 – possibly as early as May – but property experts say the ups and downs of interest rates should never be the ‘be all, end all’ for your buyer clients.
 
Eddy Boudiwan, head of real estate investments at Real Estate Rangers & Taft Forward Management Joint Venture, said: “As long as you have a decent fixed rate and controls over your debt (the mortgage on the building), buy in growth markets and manage your assets impeccably, you should do very well over the long term.”
 
A recent poll on a REP sister site asked readers whether a rise in interest rates in 2015 will be good or bad for buyers, and found that the vast majority (84 per cent) consider it a positive – especially for investor clients.
 
Real estate investor Ken Davidson agreed. “It should allow for a strengthening in the rental market,” he said. ”New homebuyers will find it harder to purchase their own home and, generally, that is who most of the landlords are catering to in the rental market.”
 
However, Davidson does admit that there are scenarios where a rise in interest rates would be bad for landlords.
 
“It could be bad for a landlord if they are leveraged and they are in a community with slow turnover and not able to increase rents due to provincial rules,” he said.
 
But for landlords who have invested in growth markets, the scenario is a good one.
 
“When interest rates rise, the demand for rentals increases because fewer Canadians will convert to home ownership,” added Boudiwan.
 
“The rental supply is, in essence, fixed because very little rental buildings are constructed – a great scenario for landlords in growth markets. The above factors will push rents up and therefore increase the value of the assets.”

COMMENTS

  • by 12/29/2014 11:02:57 AM

    Rising interest rates was always a given for me, it was just a matter of when. Every Buyer has to consider
    "Acceptable Trade-Offs", and if higher carrying costs have an effect on what kind of a house they will be
    able to get, and where, something may have to change. Perhaps a slightly smaller house, or, getting it
    over there instead of over here. Life is full of adjustments, and this will just be one of them. On another
    note, encourage your Buyers to do it now while the rates are still ridiculously low, however, they should
    be cautioned about rates being higher when the mortgage comes up for renewal, as they may have to re-
    qualify.

    Jeffrey Joseph, Broker,
    Harvey Kalles Real Estate Ltd., Brokerage
    jeffreyjoseph@realtor.com
    Toronto, ON

  • by André Riendeau 12/29/2014 12:11:55 PM

    Removed from agency bill the fees of the broker
    Than it wont increase the city tax bill mistake that goes on and on sinde decate
    Strangles our population that live here .

    Immigrant are HUMAN FIRST He! they might have $ has investor but that money can be invest somewhere else
    not only in buildings homes land.

    **Broker Please stop paying for your clients You accept to work for them for their land, businesses home , revenue property, farm industrial , industrial building office or space for rent IT DOES NOT BELONG TO YOU. The services they need must be pay now to open a file ,sing of all size installation and prices , had MLS ,R commercial Realtor residential, your site business site and share to sale business traveling But it will be deducted from the fees of the deed of sale
    Then you , your family wont suffer of missing $ to live, a lot lest credit Marge of credit card , lest stress , good agreement with the vendor or else choosing the marketing of is asset like it said on top here. Some specialize review charge 1200$ par month or every 3 months !

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