Buying a house is undoubtedly one of the most significant decisions you will ever make. It is perceived as a power move in many circles and defines the financial muscle of an individual.
Are you planning to buy a house in Canada next year?
Now, entering the housing market in Canada to buy a property can be a stiff challenge. The Canadian housing market is booming despite the national economy struggling to recover from the global pandemic.
Therefore, it’s vital to be aware of the forever-evolving Canadian real estate market—regardless of whether you are buying or selling a house. Doing due diligence will help ensure a strong footing against the challenges of increased rates and mortgage payments.
Do you need industry insights about mortgage options and rates? Are you at all versed with the present state of the rental and home-buying market? When will housing prices drop in Canada? What should you expect from 2024? Worry not!
We have made some key predictions for the housing market so that you can clearly see the inevitable. Additionally, we suggest some insightful tips for navigating the buyers’ and sellers’ markets.
Will housing prices drop in 2024 – let’s find out!
A Comprehensive Recap
We must follow the trail back to 2022 to identify when the Canadian housing market changed. At the beginning of that year, interest rates were boosted to tackle inflation. This had ramifications on the housing market, which also experienced a dramatic shift.
Prospective first home buyers found it challenging to enter the housing market because of the surging mortgage rates. An interesting scenario started developing when the inflated mortgage rates and surging housing prices took a hit on homeownership demand.
Amidst all this doom and gloom where sales slowed, the housing market saw a tiny positive outcome. We are talking about the increase in inventory resale in Canada, which pushed back the growing stride of housing prices. Additionally, we saw a drop in the median price for a new house, which now stood below the median resale home price.
We believe a window of opportunity will emerge once interest rates lower in the latter half of the year.
Will the housing prices drop in 2024? We have elaborated on it in great detail below.
Housing Market Prediction for 2024
According to our datasets, interest rates will influence the housing market this year, with both halves of the year indicating unique trajectories. The high bank rates have made it tough for realtors to finance smaller building construction projects.
Affordability challenges will remain unpleasant for new buyers if there’s a weak housing supply. However, demand in the housing market will bounce back as soon as inflation and interest rates go down, contributing to sales growth and price increments.
But will the housing prices drop in 2024? We hear you.
- A Big Plus for Supply
A positive change in the market will boost sales prospects. Mortgage renewal payment shocks will also contribute to bringing in more buyers and sellers for trade. More players entering the market will help balance the supply-demand curve and put a check on any upward surge in demand. The pandemic recorded an all-time low in for-sale inventory supply.
- The Market will be Full of Activity in 2024
According to the Canadian Real Estate Association, the housing market is poised to get busy in the latter half of the year. They also expect home resale in Canada to shoot up to 9.2% annually to 484,400 units in 2024. Although this will somewhat make up for the colossal declines of 25.1% in 2022 and 11.1% in 2023, total transactions will still fail to match the pre-pandemic levels of 2019 (490,900 units).
- More Ground to Recover In British Columbia and Ontario
The housing market in Canada fluctuates remarkably across the country and is unlikely to change anytime soon. Sky-high home ownership expenses have cut down the number of home resales in British Columbia and Ontario.
Moreover, the picture is pretty identical in Quebec. However, other local markets have shown severe resilience. The likes of Alberta, Saskatchewan, Manitoba and most of Atlantic Canada continue to record near or above pre-pandemic levels of market activity.
- Recover Already in Action in Alberta and Saskatchewan
Multiple housing reports in Canada indicate lower interest rates by the end of that year, reflecting a steady increase in market activity. Shifting your gaze towards Alberta and Saskatchewan will show a developing market trend. They are both commanding above-average resale growth this year, respectively.
- Expansive Consolidation in the Second Half
Canadian Real Estate Association is confident about its other provinces. It predicts residential transactions to bounce back in British Columbia and Ontario this year.
The momentum will continue east of Ontario, with growth rates reviving in Prince Edward Island, Nova Scotia, and Quebec. However, it will take significant rate concessions or price drops to achieve a noteworthy difference for buyers in expensive markets.
- Growing Population vs. Poor Affordability
Analyzing the housing market carefully shows deterring factors that are influencing it. The growing Canadian population is contributing to the increasing home demand. Alternatively, the inflated housing costs hinder their chances of homeownership. The long-term only shows the gap increasing after a dip in interest rates.
The poor affordability condition of most Canadians is a byproduct of the surging prices from the pandemic. In recent years, it has been a driving factor, sinking the market into a deep rectifying spiral. Consequently, it has led to a substantial amount of pent-up demand.
- Homebuilding Vital To Future Balance
Hoping to sustain the Canadian population, which is on an upward curve forever, is unattainable. However, you can expect the demographics to remain strong in the foreseeable future. Once the cyclical low tide is over, they could contribute to saturating the housing market to a sore degree again.
The housing supply response will determine the possibility of market saturation. The country should increase its housing stock by 315,000 units annually on average until 2030. Doing so will help sustain household formation.
What Is The Prediction For The Rental Market?
The Canadian real estate market is notorious for perpetual fluctuation. The rental market shares similar traits. Therefore, it only makes sense for property owners and buyers to grasp the future tendencies in the rental market.
- Traversing the Canadian Rental Market
Living in 2024, we can admit that the Canadian rental market features both opportunities and challenges. It is a constantly evolving environment in which the participants must be thoroughly informed. Therefore, both landlords and renters must have a detailed idea of the current market conditions and future predictions.
- Present Picture of the Canadian Rental Market
The rental market in Canada is a melting pot of trends from different provinces. Hence, it always reacts to regional disparities apart from economic forces. Looking at 2024, the market is inclining towards a varied approach. It will prioritize the localized nature of real estate markets.
- Housing Demand Trends In Urban Vs. Rural Areas
The urban provinces of Canada (Alberta and British Columbia) are enjoying renewed demand in the rental market. Most renters are traditionally inclined towards big cities. The abundance of amenities and space convinces them to bear the higher costs of urban living.
Will Houses Ever Be Affordable Again In Canada?
In recent years, we have witnessed the housing market only go north, making it impossible for anybody to buy a house. The surging rise in home price inflation has left most Canadians wondering if the market will ever change for the better.
Will housing prices drop in 2024? Here’s what we think:
- Forecasting Affordability through Market Trends
It’s a big challenge to prove that the real estate market in Canada will become affordable over a 5-year horizon. However, we feel the terms will encourage the new buyers to position themselves accordingly.
The Bank of Canada has gradually increased the overnight lending rate since March 2022. They have made it difficult for homeowners to pay off the already-demanding mortgages. A single-family home in Ontario, Canada, comes at a rough price of $900,000.
On the other hand, the average salary in Canada is around $55,000 annually. So, the house price will increase when you save enough money for a 20% down payment.
Another trend that you must not ignore is seasonality. You will find more real estate listings in spring and summer than in the colder seasons. So you will get more housing options or generate more investors in the market. Sellers get the privilege of being picky when choosing a buyer for their property.
Alternatively, sellers get minimal responses if they list their property during harsh winters or summers. Apart from the low buyer inquiry, it also affects the price competition, resulting in better affordability. You should target fall or winter to better your odds of finding an affordable asking price to make a purchase.
- Issues Influencing Upcoming Affordability
Our datasets have identified supply as the principal factor influencing home affordability in Canada in 2024. The country’s housing market is at a challenging crossroads, with inadequate housing supply facing rapidly growing housing demand.
As of now, housing rates will remain lofty due to the lack of homes to shelter everyone. Additionally, issues such as inflation will have a vital role to play. We expect the Bank of Canada to cut down on interest and mortgage rates to accommodate the potentially recessionary environment that awaits us in the next five years.
How Much Housing Inventory Will Grow?
The Canadian real estate market is poised for an influx of housing inventory. We feel the rise in starts is a positive move. However, real estate investors may not share the same enthusiasm. The inventory for sale has risen to its most significant levels in years, driving home prices down. We suspect another influx of inventory supply can knock prices even lower.
Canada is Witnessing New Homes While the Existing Ones for Sale Jump to Rarely Seen Levels
We are recording new construction in Canada to climb higher. It will directly create pressure on the existing home prices. The sale of existing homes has steadily dropped despite the inflated population growth. The available inventory is at its all-time high in years, thereby pressuring southwards. Although stars take their time to impact the market, they will improve the situation.
The Key Markets of Canada Are Witnessing Price Drop
Canada’s big three real estate markets are witnessing a steady inflow of starts. Montreal and Toronto both enjoyed outstanding growth in September. Although Vancouver hit a minor roadblock, it still ranks higher than last year.
While these cities have enjoyed many starts, they also record low prices for existing home inventories. The latter half of last year saw home prices drop in Montreal, Toronto, and Vancouver. Investors that typically own the majority of new supply don’t exactly jump out of their chair in thrill. However, it’s good news for home users.
The housing starts in Canada are climbing- they might not be breaking records with the data, but they look better than last year. The drop in house prices in Canada previously assisted investors in gaining a significant market share. However, price drops have wholly killed the demand.
There will be a disparity between the amount end consumers would pay and the existing home prices. The inflated existing home inventories and yet-to-be-finished new supply will contribute to closing that gap. Will housing prices drop in Canada because of this? We see optimism.
Tips for Home Buyers and Sellers
Industry Tips for Homebuyers:
- Partner Technology
To get the best deal, you must incorporate technology into your home-buying experiences. The Canadian housing market quickly integrates innovative digital features such as virtual tours, augmented reality apps, and online platforms. You will now have the flexibility to explore properties from the comfort of your home.
You should become tech-savvy to improve your real estate searching measures. If you are working with a real estate to make a housing purchase in 2024, find out if they are familiar with the updated technology.
- Research Local Trends
You must take note of the local trends and developments once you have covered the individual properties in a house. Before making your final decision, you will benefit from amassing essential information about local schools, amenities, and future development plans.
You should consider online resources to generate updates. You can also join online platforms to connect with like-minded and relevant residents. These can be valuable channels for getting a detailed picture of Canada’s houses, properties, and communities.
- Explore Flexible Financing
You must find an ideal financing option that can serve your purpose. You will stand on solid ground by joining forces with financial advisors amidst fluctuating interest rates and evolving mortgage products. They will help you avoid unseen errors while securing the best deal.
Mortgage professionals and other finance experts bring the industrial knowledge necessary to navigate the tricky landscapes of the housing market. Meet a few housing finance guys to learn their respective processes. This will assist you in identifying who is best for your needs.
Industry Tips for Sellers:
- Improve Digital Presence
You will benefit by collaborating with a local realtor with a compelling digital footprint. They should be adept at virtual interactions using high-quality photos and online tours. In simple terms, realtors with considerable online presence draw more buyers. Moreover, they will also penetrate a wider audience (often indicating a quick and more competitive sale).
- Pricing Plans
Pricing plays a significant role when you are a seller in the Canadian housing market. You should refer to relevant data analytics and experienced real estate professionals to land your property’s best price. Your best bet should be to find competitive pricing to generate quicker sales.
- Energy Efficiency Sells
Energy-efficient commodities are all the rage now due to environmental concerns. To adhere to this sentiment, you must consider incorporating eco-friendly elements in your property. Installing solar panels, energy-efficient appliances, or smart home systems will make your house more attractive to buyers. You will be widening your potential buyer pool while boosting your property’s value.
Is 2024 a Good Time To Buy a House?
Countless Canadians have lost their footing in the real estate market since the global pandemic. However, the macroeconomic environment is returning to normalcy, and people are starting to wonder if this is the most prudent time to make purchases.
We have compiled a list of some potential pros and cons that will allow you to measure your stance in the current housing market:
Pros
- Improve Your Equity
Investing in real estate properties contributes to equity. Simply put, your mortgage payment is a sum of monthly installments and equity. You are building your equity while paying the monthly installments. You can exercise a loan or simply sell the property to get this money back.
But this is not the case for rental arrangements. Any rent you pay goes directly to the landlord’s pocket, so rent represents a loss of net worth.
- Bargaining Power
The housing market in Canada is somewhat balanced, balancing buyers and sellers. Sellers are more likely to facilitate room for negotiation since most people would be hesitant to make purchasing decisions due to high rates or market uncertainty. Any hint of declining interest rates will saturate the market with new buyers, diminishing your bargaining chip.
Cons
- Difficult to Qualify
The tricky combination of high interest rates and demanding stress test requirements will compel people to miss out on their desired housing properties. The ideal scenario is to wait for the interest rates to drop or for your income and credit score to shoot up.
- Uncertainty
Well, this one is pretty obvious! Any major decision involving the housing market in Canada will come with an element of uncertainty. Will you commit to high interest rates if they drop eventually? What about the possibility of plummeting home prices in the next few years if new policies are revised or introduced? You should do your due diligence when making major real estate decisions to avoid disastrous scenarios.
Learn More About Canadian Real Estate Market with the Experts
If this is your first time investing in the Canadian real estate market, you must keep a few things in mind. Investing in a house is a massive financial commitment. Investing early will help you build equity, too. However, housing ownership also involves a lot of financial responsibilities—those are enough to flush your savings if you’re not careful.
