Longer-term fixed mortgage rates typically follow longer-term bond yields. The Greek debt crisis put a stop to rising bond yields as traders moved money out of risky assets.

“Both treasuries and Government of Canada bonds have recently benefited from a flight to quality on the back of renewed sovereign debt concerns in Greece and other parts of Europe,” CIBC World Markets noted in a recent commentary.

Many mortgage experts say the pause is just temporary and note that bond yields are already edging higher as the EU’s bailout package eases Greek default concerns.

Variable mortgage rates are tied to the Bank of Canada’s overnight lending rate. After recent healthy signals coming from various sectors of the Canadian economy, including last Friday’s unexpectedly strong jobs report, the markets now expect the central bank to bump up its key rate on June 1. That rate has been at a rock-bottom 0.25 per cent for more than a year

So, people think Greece (and by extension the other European countries that are heading for similar problems) are risky, so they’re putting money into the safe Canadian investments.  That means Canadian banks can lend money cheaper, so we can borrow it at a lower interest rate when we invest in a Condo.

What about the other part – how the Greek Spending & Debt Hangover is affecting sales of apartment buildings in Kitchener Waterloo

Kitchener Apartment Building Tied Up In PIIGS Crisis in Europe

A few weeks ago we had a real estate investor looking at an apartment building that came on the market.  Great location, well priced, good tenant profile.  We hadn’t done any due diligence, but so far so good.   We proceeded with an offer. 

The sellers are from Europe, and own assets in some of the PIIGS countries (Portugal, Italy, Ireland, Greece and Spain; the acronym refers to their financial situations, which ratings agencies feel is inferior to other Euro Zone countries like Germany).

Turns out, due to recent deterioration of the financial situations in those countries, they’re rethinking selling their assets in Canada – as we looked at a few weeks ago (Commercial Real Estate news in Canada) investors from across the world look to Canada as a stable economy, and the sellers apparently may want to keep their property here.  In the meantime, our clients are looking at other opportunities. 

So the situation in Greece is good news for people who want a mortgage, but for my client who wanted a quality building, it is a Greek Tragedy.  There may be a happy ending yet, but we’re not holding our breath.

If you have any questions about the real estate market in Waterloo, or for a free list of cash flow producing investment property for sale in Kitchener Waterloo, email me at Benjamin@BenjaminBach.com

KW Commercial is your one stop shop for commercial, investment, retail and multi family advice and brokerage in Waterloo Region.