If you’re looking at the Canadian housing market, you might be wondering what will happen next year. Will house prices go up or down? Will interest rates stay high or drop? Here’s a simple look at what to expect in 2024.
Early 2024: Slow Start and High Interest Rates
At the start of 2024, we think the housing market will be slow. Interest rates are expected to stay high, which means it will be hard for many people to buy a home. The Bank of Canada has kept its interest rates at a high level not seen in 20 years. Because of this, buying a home is still out of reach for many Canadians.
However, things might change later in the year. If the Bank of Canada starts lowering interest rates, we could see the market pick up speed. More people might start looking to buy homes again, which could make the market hotter. But, even with lower rates, it will take time for things to really improve. Buyers will need to wait for a big drop in interest rates before they can afford homes more easily. This is especially true for first-time buyers who might have less money.
More Homes for Sale
As the market gets busier, more people might decide to sell their homes. Some might need to sell because their mortgage payments are too high. More sellers would help keep the number of homes for sale balanced with the number of buyers, so prices might not rise too quickly. Over the past few years, the number of homes for sale has been going up after dropping to very low levels during the pandemic.
Market Activity in 2024
We expect home sales in Canada to go up by 9.2% in 2024, reaching about 484,400 homes sold. This is better than the big drops we saw in 2022 and 2023, but still less than the number of homes sold before the pandemic in 2019. By 2025, we think home sales will increase even more, reaching about 562,100 homes, which is a 16% rise.
Differences Across the Country
The housing market will not be the same everywhere in Canada. In British Columbia and Ontario, high costs have made it hard for people to buy homes. Quebec isn’t seeing much change either. But in other provinces like Alberta, Saskatchewan, Manitoba, and most of Atlantic Canada, the market is doing better.
In Alberta and Saskatchewan, we already see signs of recovery. Lower interest rates later in 2024 should help these provinces see more home sales, with growth rates of 13.5% and 9.4%, respectively. Other areas might start to recover by summer. We forecast a small rise in home sales in B.C. (6.4%) and Ontario (7.7%). The eastern provinces will see even bigger increases, with Prince Edward Island growing by 15.8%, Nova Scotia by 15.5%, and Quebec by 10.2%. Expensive markets might need bigger rate cuts or lower prices to make a real difference for buyers.
Home Prices in Different Provinces
Home prices will vary a lot across the country. We expect prices to go up in Alberta (2.2%), New Brunswick (0.7%), Nova Scotia (0.2%), and Saskatchewan (0.1%). On the other hand, prices might go down in Ontario (-2.0%), Manitoba (-1.8%), Newfoundland and Labrador (-0.6%), B.C. (-0.3%), and Quebec (-0.2%). No big changes are expected in Prince Edward Island.
The Housing Market’s Big Challenges
Two big things are affecting the housing market. First, the growing population means there is a strong need for homes, including rentals. But, high costs are stopping many Canadians from buying a home. If interest rates drop a lot, more people might be able to buy homes. The high cost of homes and rising interest rates over the past two years have caused a big slowdown in the market and left many people waiting to buy.
Mortgage Renewal Payments
Many Canadians will face higher payments when their fixed-rate mortgages come up for renewal. This could be too much for some people, and they might need to sell their homes. But, we don’t expect a big wave of people being forced to sell. Most people with mortgages have already been tested to handle higher rates. This has helped keep mortgage problems at a low level in Canada so far. There is still room for more homes to be put up for sale before it becomes a big issue.
Building More Homes for the Future
While we don’t expect the current high population growth to continue forever, it will likely remain strong for a while. This could make the housing market heat up again once things start to get better. Canada will need to build about 315,000 new homes every year until 2030 to keep up with the growing number of households. This is a lot more than the number of homes built in recent years and will be a big challenge, especially with the current problems in the construction industry.
