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Canada Housing Market Outlook for 2024: What to Expect

As the calendar turns towards 2024, the Canadian housing market stands at a crossroads, poised for a potential turnaround after nearly two years of interest rate hikes by the Bank of Canada. In this comprehensive analysis, we delve into the intricate dynamics that will shape the real estate landscape in the coming year, exploring factors from interest rates to regional variations and their impact on both buyers and sellers.

The Interest Rate Conundrum

Gauging the Pulse: Bank of Canada’s Policy Rate

The Bank of Canada’s benchmark interest rate has been the compass guiding the housing market, and 2024 is no exception. While recent Ipsos polling indicates that high-interest rates have left 73% of Canadians on the sidelines, forecasts hint at a possible shift. The looming question is not just when the correction hits bottom, but how vigorously home sales and prices will rebound.

Millennials and Regional Perspectives

Elevated interest rates are particularly sidelining millennials (85%), with significant impacts in British Columbia (76%) and Quebec (86%). Ipsos Global CEO Darrell Bricker emphasizes the crucial aspect of mortgage affordability, suggesting that the ability of existing mortgage holders to weather increased payments will play a pivotal role in shaping the market.

Canada Housing Market Outlook for 2024: What to Expect

Unveiling the 2024 Housing Landscape

RBC’s Economic Outlook

RBC assistant chief economist Robert Hogue forecasts a gradual uptick in activity as 2024 unfolds. While the spring market may witness a surge, high borrowing costs are expected to cast a shadow over the first half of the year. Hogue anticipates growth in housing supply, but not a mass listing by sellers. The key lies in the interplay between fixed mortgage rates, bond yields, and investor sentiment.

The Royal LePage Perspective

Aligning with RBC’s projections, Royal LePage envisions a market pick-up in the second half of 2024, projecting a 5.5% year-over-year increase in home prices. CEO Phil Soper highlights pent-up demand and the psychological barrier that needs overcoming – the confidence that the price correction has concluded.

Interest Rate Cuts: A Catalyst for Change

Anticipation builds for potential interest rate cuts, projected for the second quarter of the year. Hogue and Royal LePage foresee a modest uptick in demand, emphasizing that a substantial revival hinges on multiple interest rate cuts. This suggests a potential “lift up” in the housing market in the latter part of 2024.

The Ripple Effect on Rentals

The Rental Conundrum

While homeowners face challenges in the higher rate environment, renters grapple with rising costs. Hogue notes that easing borrowing costs could not only boost ownership but also alleviate rental pressures. However, he warns that despite hopes for relief, tension may persist in the rental market due to steady immigration levels.

Homeownership Perception

The Ipsos polling reveals a concerning trend – 77% believe homeownership is only for the rich, and 71% have given up on owning a home. This challenges policymakers to address not just affordability but the fundamental perception of homeownership.

Affordability in Focus

Trends and Reversals

Housing affordability hit a 41-year low in Q3 2023 but exhibited signs of reversal in Q4. Ratehub.ca’s data indicates a decline in the income needed to buy a home across major cities. However, Calgary stands out as an exception, showcasing the importance of regional dynamics.

Supply-Side Challenges

Hogue underscores the vital role of supply in affordability, highlighting the gap between current housing starts and the need for 3.5 million additional units by 2030. The federal government’s push for increased construction faces skepticism from experts, who question its efficacy in addressing the demand-supply imbalance.

Outlook and Projections

The Role of Government Initiatives

As the federal government ramps up efforts to accelerate construction, experts remain cautious about its impact on affordability. Soper emphasizes the need for a holistic approach, considering both the high variance in home values and the influence of remote work on migration patterns.

2024: A Make-or-Break Year

With promises and proposals swirling at all levels of government, 2024 emerges as a critical juncture. Ipsos’ Darrell Bricker notes the impatience of Canadians for tangible results, signaling that the coming year will be a litmus test for policymakers.

Conclusion

In the complex web of factors shaping Canada’s housing market in 2024, the interplay of interest rates, buyer sentiment, and government initiatives will dictate the trajectory. As we stand on the brink of change, the ability to read and navigate these currents will determine not just market outcomes but the broader socio-economic fabric of the nation.