We’re always tuned to the dynamic landscape of real estate and alternative investment. As we enter 2024, several trends are poised to shape the Canadian real estate market. Let’s explore these trends and what they mean for investors.
The central bank’s assertive 10-hike cycle, aimed at cooling an economy post-pandemic, is expected to conclude in 2024. Potential buyers may find renewed confidence with forecasts hinting at the end of the housing market correction.
A gradual rate decrease is anticipated as the central bank contemplates rate cuts to stimulate borrowing. Investors should be mindful of the delicate balance, as rate cuts can impact the Canadian Dollar’s value against the US Dollar, potentially leading to imported inflation.
This process is delicate and slow, but rate reductions are expected this year. As rates decline, it makes sense to expect housing prices to increase. For prospective buyers, the prediction of rising house prices emphasizes the advantage of acting sooner rather than later while providing confidence that their investment will not drastically lose value in the coming years.
While housing affordability hit a 41-year low in Q3 2023, signs of a reversal emerged in the final quarter. Declining fixed mortgage rates and the anticipation of rate cuts contributed to this shift. Navigating the evolving interest rate landscape requires vigilance and strategic decision-making. Softening fixed mortgage rates could lead to homeowners returning to the market in the spring. We could also see people selling due to the new rates when it comes time to renew their mortgage.
One thing is certain: Housing affordability will still be a motivating factor in real estate in 2024. For many homeowners, having a rental suite or similar income to offset the mortgage is a significant factor when buying.
For those in the rental market, the past year brought challenges with spikes in rent, contributing to overall inflation. Although inflation has tapered, shelter costs remain a significant expense for Canadians. Towards the end of 2023, rental markets showed signs of easing, with the pace of increases slowing and average rents stabilizing or slightly decreasing in key cities.
Demand for rentals continues, as we see a lot of immigration and migration between provinces. In many cases, people decide to rent before buying. A shortage of housing supply is still a significant factor in the rental market, particularly in major cities. As rental markets adjust, landlords and tenants navigate a landscape influenced by shifting economic dynamics and borrowing costs.
This high demand for multi-family homes and affordable rental dwellings is causing further development and high-density buildings in many cities across Canada.
Addressing Canada’s housing shortage demands robust construction efforts. The Canada Mortgage and Housing Corp. emphasizes the need for an additional 3.5 million housing units by 2030. The federal government’s commitment to an accelerated building initiative reflects the urgency to increase housing supply.
Developers are gearing up for a heightened pace of construction. Understanding the evolving construction landscape provides valuable insights into potential growth areas for real estate investors.
As 2024 unfolds, real estate investors face a market shaped by interest rate changes, rental market dynamics, and increased construction activity. Alternative real estate investment types merit consideration to navigate potential volatility.
At Cooper Pacific, we emphasize the importance of diversification. Investors keen on avoiding the impact of rate changes can explore alternative options, and mortgage pools are an avenue worth exploring. The demand for housing and the ongoing need for multi-family and high-density rentals ensures that real estate development remains a vibrant sector.
If you’re curious to learn more, contact Jordan on our team.
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