Personal Finance

Potential Opportunities may be Open in Canada for First-Time Homebuyers 2024

A potential opportunity is emerging for individuals purchasing their first homes.

A potential opportunity is emerging for individuals purchasing their first homes.

In the dynamic landscape of Canada’s housing market, there’s a glimmer of hope for prospective first-time homebuyers.

According to a recent forecast by the Royal Bank of Canada (RBC), the clouds of unaffordability that have cast a shadow over the market may begin to dissipate later this year.

In this comprehensive analysis, we delve into the nuanced projections outlined in the RBC report, examining the two distinct halves of 2024 and the factors that could pave the way for aspiring homeowners.

The Tale of Two Halves

1. Interest Rate Pressures in 2024

The RBC report, authored by Robert Hogue, RBC’s assistant chief economist, anticipates a subdued housing market in the first half of 2024.

This restraint is attributed to the pressure exerted by the Bank of Canada’s benchmark interest rate.

Hogue contends that higher borrowing rates, linked to the still-elevated policy rate, will act as a mitigating factor, resulting in a more gradual liftoff during this period.

2. Mid-Year Pivot and Accelerated Demand

However, a pivotal moment is projected in the second half of the year, marked by potential rate cuts.

Hogue suggests that this shift could set the wheels in motion at an accelerated pace, fueled by pent-up demand in the market.

The report identifies “the severe loss of affordability” as a consequence of pandemic-induced home price surges followed by rapid tightening from the Bank of Canada, leading to a nearly two-year housing correction.

Canadian Housing Market Dynamics & Forecast

1. Housing Activity and Price Index Expectations

RBC projects a 9.2% annual rise in housing activity compared to the previous year.

Despite this, the Real Property Solutions (RPS) home price index is anticipated to experience a 1.0% decline in 2024, following a 2.6% drop in 2023.

Notably, a meaningful climb in home prices across the country is forecasted for 2025, with an expected 3.1% increase in the RPS index and a robust 16% gain in sale volumes.

2. Supply and Demand Dynamics

The report suggests that the trajectory of home prices post-rate cuts hinges on the improvement of supply in the housing market.

Potential mortgage renewal shocks are acknowledged, but RBC does not foresee a wave of forced selling.

Instead, an influx of sellers could balance supply-demand conditions, tempering upward pressure on demand.

Opportunities for First-Time Home Buyers in Canada 2024

With national home prices projected to remain below the peak seen in 2022, frustrated would-be buyers may find a window of opportunity.

Anticipating more substantial interest rate cuts in the second half of 2024, Hogue suggests that affordability could improve overall, especially for financially constrained first-time buyers.

The report emphasizes that this larger window of opportunity is likely to open after interest rates have dropped materially.

Regional Perspectives

1. Market Rebound and Regional Variances

While Canada’s two most expensive housing markets are expected to rebound modestly in 2024, other provinces such as Alberta and Saskatchewan are already showing signs of recovery.

Price drops are anticipated in provinces like British Columbia, Ontario, Manitoba,

Newfoundland Labrador, and Quebec. However, the report underscores that meaningful changes for buyers in expensive markets may necessitate more significant rate cuts or deeper price drops.

2. Impact of Government Policies

RBC notes that the federal government’s plan to cap international student permits for two years is unlikely to have a substantial impact on overall homebuying demand.

However, localized effects on rental markets near post-secondary institutions in Ontario and British Columbia are expected.

In conclusion, the RBC’s insightful forecast paints a complex yet optimistic picture of Canada’s housing market in 2024.

As the clouds of unaffordability gradually lift, a strategic approach by first-time homebuyers may yield opportunities.

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The second half of the year, marked by potential rate cuts, could be a turning point. Stay informed, stay vigilant, and explore the evolving landscape of Canada’s real estate with a keen eye on the opportunities that may unfold.