The Canadian housing market is experiencing some unique shifts in 2024, with both challenges and opportunities for homeowners and investors. Elevated interest rates and ongoing market adjustments are shaping the landscape, but as the year progresses, conditions may improve. Here’s a breakdown of the key trends and what they mean for the market.

Key Takeaways:

• The Canadian housing market experienced slower activity in early 2024 due to the Bank of Canada’s high interest rates. However, an uptick in market activity is expected as interest rates may decrease later in the year.
• Population growth and housing affordability are critical drivers of the market, especially in provinces like British Columbia and Ontario.
• British Columbia and Ontario are seeing stagnant home sales, with rising inventory contributing to subdued real estate prices.
• Mortgage Investment Corporations (MICs), offered by Amur Capital, continue to provide stable returns and have seen increased assets under management.

A Slower Start to 2024

Interest rates remain a dominant factor in Canada’s housing market this year. The Bank of Canada’s policy rate, held at 5% since July 2023, has kept borrowing costs high, which in turn has impacted both homebuyers and sellers. As a result, the housing market saw slower activity in the first quarter of 2024, a trend that is expected to continue in the short term.

According to the Canadian Real Estate Association (CREA), the number of newly listed properties fell by 1.6% in March compared to February. Home sales, while showing a slight uptick of 0.5%, still remained about 10% below the ten-year average for March. Despite these slower figures, the average home price remained relatively steady at $729,700, with only minor fluctuations from month to month.

Nevertheless, March’s end and the early weeks of April saw a slight increase in sales and listings, hinting at a more active market by mid-2024. National home sales are projected to rise by 7.8% by the year’s end.

Anticipating a Recovery Later in the Year

The Canadian Mortgage and Housing Corporation (CMHC) suggests that a combination of pent-up demand, increasing rental prices, and the expectation of lower interest rates could drive market activity in the latter half of 2024. Regional markets are expected to show varied performances:

British Columbia and Ontario
The housing markets in British Columbia and Ontario, which are home to some of the highest property prices in Canada, are likely to continue facing challenges. High housing costs, combined with financing difficulties for both developers and buyers, may suppress home sales. However, the anticipated interest rate cuts by the Bank of Canada could boost affordability, leading to a recovery in the second half of the year.

In Metro Vancouver, demand for more affordable homes like apartments and townhouses could lead to an increase in resale activity. It is forecasted that Vancouver will see 46,200 home sales, with average prices hovering around $1.25 million.

Meanwhile, Toronto is expected to see a modest increase in home prices, particularly for ground-oriented housing. With 88,300 homes projected to be sold in the Toronto area, the average price is expected to reach $1.20 million.

Alberta and Saskatchewan
In contrast to the challenges faced in the larger provinces, Alberta and Saskatchewan are expected to see positive market conditions due to their more affordable home prices and a high volume of ongoing construction projects.

Cities like Edmonton are benefiting from housing affordability, with rising demand attracting more people than in pricier cities like Toronto or Vancouver. Home sales in Edmonton are projected to grow modestly to 30,000 units, with prices increasing to an average of $420,000.

In Saskatoon, prices are expected to rise by 2% to nearly $384,000, with about 4,000 homes forecast to be sold. Despite the positive outlook, limited housing inventory and high interest rates remain significant hurdles for potential buyers.

Population Growth vs. Housing Affordability

One of the most significant pressures on the Canadian housing market is population growth, which continues to push demand for homes higher. Canada saw its fastest population increase in decades during 2023, driven by immigration and the influx of temporary workers. With Canada’s population surpassing 40 million, this rapid growth is placing additional strain on the housing market and related sectors like healthcare.

Optimism for the Broader Economy and Real Estate Investment

Despite the current challenges in the housing market, the outlook for Canada’s broader economy remains positive. The commercial real estate investment sector is expected to see a recovery in the second half of 2024, with a normalization of market spreads and growing real estate activity. According to CBRE, the demand for all types of real estate will continue to rise, fueled by population growth and economic expansion, placing Canada ahead of other G7 countries in terms of investment activity.

Conclusion

While the Canadian housing market faces challenges in early 2024 due to high interest rates and affordability concerns, there is optimism for a recovery in the latter half of the year. The combination of lower interest rates, increased inventory, and strong population growth should provide opportunities for investors and homebuyers alike. As always, staying informed about market trends and adjusting strategies accordingly will be key to navigating these changes successfully.