If you’ve been following the housing market in Canada in recent months, you’ve likely noticed some clear cracks. For the past four years, the market has felt like a roller coaster, with plenty of twists and turns. We’ve witnessed the housing lows that came with lockdowns and aggressive interest rate hikes. We’ve also seen the market rally like never before, thanks to said lockdowns being declared over and rate hikes being put on pause. So what could possibly be next? While it’s anyone’s guess, we decided to ask the experts: Canadian real estate agents. 12 of the country’s leading agents are giving us their take on what the 2024 housing market has in store for all of us, based on current rates. So, buckle up — it’s bound to continue to be a wild ride for those keeping track.
Shelley Vinayak (Calgary, Alberta)
The burning question on everyone’s mind, particularly for homeowners and real estate investors, revolves around when the Bank of Canada will opt for interest rate cuts. Is 5 per cent the longer term key policy rate or has the current rate cycle been too fast and mean with the lagging effects still to be realized?
The constantly changing economic landscape can quickly change predictions on interest rates. Following the last two consecutive quarters of weakened GDP growth, it appears we are at the end of the tightening cycle. With unemployment levels rising to their highest since January 2022 last month and a softening trend in retail sales, the Bank of Canada policy rate now stands still at 5 per cent. The central bank’s aggressive 10-hike cycle was aimed at cooling down an economy overheated by the COVID-19 pandemic. It looks to be working with inflation down to 3.1 per cent in October from its peak of 8.1 per cent last year and excess demand subsiding.
A rate cut signals the Bank’s intent to stimulate borrowing, spending, and investment through managing the money supply. Despite the signs of a softening economy, Inflation remains above the 2 per cent target and unemployment remains below 6 per cent. The Bank has consistently communicated its intention to proceed cautiously with early easing measures, extending the timeline beyond the anticipation of many.
Expect a stable policy rate in the first half 2024, coinciding with around 3.4 million Canadians renewing mortgages at higher rates over the next 18 months. The ‘higher for longer’ scenario will continue to restrain spending, weaken GDP growth (driving a more pronounced recession), and potentially drive rate cuts in the latter half of 2024. The descent in rates is anticipated to be more gradual than the ascent.
Daniel Foch (Greater Toronto Area)
I think the path of rates really depends on a variety of factors – so my answer to the question would be a variable one. I would imagine the Bank of Canada’s goal is to engineer a “soft landing” for the Canadian economy, which would entail a few small rate cuts earlier in the year to ease the pressure on borrowers and businesses without resurrecting inflationary forces. The big challenge with this strategy is that if the Bank of Canada cuts rates before the US Federal Reserve does, then the value of a Canadian Dollar Relative to a US Dollar will decrease. This could cause a phenomena called “imported inflation”, where goods become more expensive in Canada simply because we buy them in a more expensive currency.
My expectation is that if interest rates come down in a meaningful way (100-200bps) by the end of next year, it’s because our economy is in a severe recession, which does seem like a relatively likely path for the Canadian economy. I think most economists are reluctant to paint this picture, however, Benjamin Tal of CIBC states that if the Bank of Canada has to choose between an inflation and a recession, they’ll choose a recession every time. In the past 100 years – recession always gets inflation back down to the neutral range, and it takes about 16 months to do so on average. This is the scenario I expect – a recession through most of next year, and rate cuts in response to it by the end of the year.
I would say to all those professionals praying for steep rate cuts: be careful what you wish for. A big drop in rates means a bad economy. A bad economy is not a good thing.
Jade Skuce (Orangeville, Ontario)
Market trends 2024 indicate that there should be a positive shift in the real estate industry next year. With the anticipated interest rate reductions, 2024 could be a fantastic year for those involved in real estate. I expect the latest projections to create a more balanced market, with a more significant number of properties available and renewed interest from previously hesitant buyers. In light of these developments, sellers must be proactive in their marketing efforts to ensure that they maximize the value of their properties. For example, the property’s staging, presentation, and positioning in the market will ensure the quickest and most profitable results possible. In the same vein, potential buyers should seek the assistance of a local expert who can accurately determine the true worth of a property and work hard for them to get the deal done. All in all, the upcoming year promises to be a fascinating time that could hold immense potential for real estate opportunities.
Stacey Devoe (Halifax, Nova Scotia)
In the current environment, where interest rates have appeared to stabilize, buyers have a unique opportunity to purchase property. We are witnessing less competition and more negotiations taking place during transactions. The stability in interest rates and buyers having time to look and make decisions is building confidence among buyers in our market.
I anticipate a decrease in interest rates during the Spring of 2024. This expectation is based on the recent decision by the Bank of Canada (BOC) to refrain from raising rates. While the central bank contends with a slowing economy and high inflation, they may consider lowering interest rates but not until later in the Spring.
As interest rates eventually decline, it’s reasonable to expect that house prices will increase. For buyers weighing their options, this prediction suggests that acting sooner, rather than later, may be beneficial in today’s market, potentially avoiding heightened competition and higher prices.
Jacob Berkenblit (Toronto, Ontario)
The current interest rate in Canada is 7.2 per cent, fluctuating based on inflation, market conditions, and policy changes. Annually, the Bank of Canada revises rates, influencing various banking products. Currently aiming for a neutral rate, projections suggest it may reach 4.5 per cent by 2024.
Predictions for 2024 include a 0.25 per cent increase and expectations of rate cuts in Q2 2024. Long-term variable mortgage rates are expected to stay at 5 per cent, with projections of a 2 per cent cut in 2024 and 1 per cent in 2025. The key interest rate is estimated to be around mid-4 per cent in 2024 and mid-3 per cent in 2025, with a potential policy rate of 2.25 per cent by 2025 as inflation slows.
Economists anticipate the BoC initiating rate cuts in Q2 2024 due to slowing inflation and economic growth. BoC Governor Tiff Macklem suggests current rates may be restrictive, but it’s not yet time to cut. Most economists expect the main policy rate to remain at 5 per cent until at least the end of March. A consensus of 25 out of 26 economists expects a steady rate, with one predicting a 25 basis point hike. Interest rate futures suggest a March rate cut. Analysts foresee a 3.3 per cent decline in home prices in 2023, stagnation in 2024, and improved affordability. However, there’s an expected decrease in homeownership proportions over the next five years, with new supply considered insufficient to meet future demand. Simply put, we have an increasing population and not an increasing supply of homes.
If it were me and I were renewing a mortgage in 2024 or purchasing a home in the spring of 2024, I would strongly consider a variable-rate mortgage and expect 2021/22 home prices in 2024. As rates trend downward, buyers will slowly return to the market, increasing demand on a limited supply.
Caroline McIntosh (Creemore, Ontario)
Realtors don’t have a crystal ball to look into for market predictions. What we do have is historical data, and current market conditions. 2023 ended off with rate holds and a softer language from the BOC surrounding future rate announcements. I predict in 2024 we will see the prime rate continue to hold until late in the 2nd quarter, with rates starting to come down late Spring. We will move back into a balanced market by mid 2024. The traditional Spring Market will be strong, and the rates will come down slightly to support the shift from Buyers Market to Balanced Market. If you are thinking of Selling, look to the Spring! If you are buying, get busy now.
Matthew Lee and Ming Lim of Volition Properties (Toronto, Ontario)
Everyone is freaking out about interest rates. But here’s the interesting thing: interest rates are actually just a “Market Influencer”, which has a drastic, but temporary, effect on the market. They are not, however, an “Economic Fundamental”, which fundamentally underpins the long-term strength and resiliency of a market. Of course, rising interest rates starting March 2022 immediately resulted in lower prices, but ultimately they don’t have the type of impact that everyone thinks they do.
In Spring 2023 after the Bank of Canada held interest rates steady, we saw buyer confidence resume and the market take off again – so absolutely, interest rates can correlate with prices. But taking a closer look at the small 0.25 per cent rate hikes in Summer 2023, followed by the subsequent rate holds in Fall 2023, you’ll see that this last round of rate holds didn’t have that same market recovery impact as previous rate holds. Why?
The reasoning is more about market psychology than anything else. Conventional wisdom states that increased mortgage payments was the reason buyers weren’t buying. This is only partially true. They missed this very important fact: buyers didn’t want to be buying in an environment of uncertainty – and the rising interest rate environment was anything but certain. Buyers had mistakenly thought that the first rate hold signaled the end of the rising interest rates, and so weren’t about to fall into the same trap again upon the second rate hold… hence the real estate market remained slow in Fall 2023.
Currently, the major macroeconomic factors seem to be under control. The inflation numbers are on a downward trajectory coming close to BOC’s target inflation of 2-3 per cent, and the Chief Economists at the Big 6 banks are betting on almost a 1 per cent rate decrease by the end of 2024, with cuts starting as early as Q1 2024. The worst is finally behind us, and buyers are slowly regaining confidence, particularly buyers like Volition Properties‘ clients who are primarily investors who understand that the Economic Fundamentals of the Toronto Real Estate Market remain solid. With the recent BOC Dec 6 rate hold announcement and the US Fed announcing three rate 0.25 per cent cuts in 2024, we are finally starting to see stability and a revival of the market, including multiple offer situations again (at least in Toronto)!
Erin Monett (Muskoka, Ontario)
My prediction for the 2024 market is slow at first. There is still some buyer reluctancies from the sting of high interest rates and they are holding out to see if it comes down. I foresee a strong spring and summer housing market in Muskoka. Huntsville in particular is booming with new construction. Where there might be a decline is waterfront cottages in the price range of 500k to 1 million. This price point is usually people’s second mortgages or inherited family properties. High waterfront taxes and carrying costs will begin to squeeze. Cottages below 500k are usually seasonal (closed from October to May) and have very low carrying costs. I don’t believe the 2 million+ demographic will change at all and properties in those price points will continue to trade as usual.
Justin Bregman (Toronto, Ontario)
My prediction for 2024 is that the bank of Canada is going to announce their first interest rate reduction roughly between April to June of 2024. This will give a lot of confidence to all buyers in our market. In fact, we are already seeing right now that supply has dropped by nearly 30 per cent over the holidays with a lot of sellers anticipating that they can get better prices for their homes as we approach the spring of 2024. In terms of sale prices, I predict that we will see the first rebound in the freehold Toronto market followed by the freehold submarkets of the GTA and lastly, we will see a rebound in the condo market. The condo market has taken the biggest downward turn since interest rates have risen due to investors not being able to cover their mortgage payments with the rent. This has almost entirely eliminated investors from purchasing any condos. I anticipate this starts to change and investors come back to the market and add competition once we see a reduction in interest rates. My final prediction for 2024 is a year over year increase in sale prices of about 7 to 9 per cent.
Sylvia Castonguay (Calgary, Alberta)
Experiencing record-setting net migration, both internationally and inter-provincially, Alberta continues to see strong demand for housing. With a thriving Oil and Gas sector and Calgary maintaining its affordability compared to other major Canadian cities, all signs point to a robust Spring market. I anticipate that there will be modest declines in interest rates in 2024, and more meaningful decreases in 2025 when the economy is further into recession. Having said that, even a small reduction in rates next year will be enough to entice those sitting on the sidelines to re-enter the market. I don’t foresee a major decrease in prices for Calgary as inventory levels remain exceptionally low.
Steve Saretsky (Vancouver, BC)
Interest rates will come down in 2024, although its hard to say how much given the increased volatility in the world these days. Keep in mind that if rates come down in a big way it likely means the economy is in a pretty serious recession which means job losses and likely more challenges for the housing market. Finding that sweet spot between a modest decline in interest rates and a half decent economy will be the tricky part. Overall I expect housing volumes to pick up from a very soft 2023, although they’ll probably remain weaker than usual.