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Economic Outlook for 2024

With 2023 behind, here is what we can expect in 2024

Looking back at a lackluster year for Canada's real estate market, the upcoming prospects for 2024 seem more positive.

Signs point towards the Bank of Canada (BoC) nearing the conclusion of its current rate-hike cycle, a favourable development for those holding floating rates, especially investment property owners preferring variable-rate mortgages.

Starting at 5.9% and gradually decreasing to 3.1% in November, the inflation rate indicates that the Bank of Canada may maintain its pause on rate hikes, though a cautious approach is still evident. Although the Bank of Canada may not achieve its 2% inflation target until well into 2025, there are signals suggesting a shift in mortgage rates for 2024. Both market analysts and economists are anticipating a reduction of 1-1.5% in the overnight lending rate. Albeit not all at once, instead the BoC will likely gradually decrease rates, while closely monitoring inflation and the economy.

This anticipation for both the Bank of Canada and the US Federal Reserve to cut rates in 2024 has spurred a positive response in bond markets, leading to reduced fixed rates, particularly the 5-year rates, and a decline of up to 1% in some insured rates. These changes in the market favour prospective buyers, especially first-time home buyers with less than a 20% down payment, signaling an opportune time to consider entering the housing market.

In 2023, the Canadian housing market exhibited varied trends across provinces. While home prices in most urban centres of some provinces declined, other regions experienced consistent price increases. The expectation of an end to the current cycle of rate hikes could reignite buyer interest, potentially drawing back those who adopted a 'wait-and-see' approach in 2023 into the market in 2024.  

Transitioning from the economic update, recent findings by CMHC in the housing sector provided these insights:

Rental Turnover Rates:

The 2022 Rental Market Report, released in January 2023, provides a comprehensive overview of recent historical rental dynamics. Based on CMHC's Rental Market Survey and Condominium Apartment Survey, this annual report presents insights into tenant mobility and unit turnover rates, influencing factors like affordability and regional demand. The report highlights increased turnover in urban centers, potentially linked to job changes or the pursuit of affordable housing, urging tailored policy approaches to address distinct challenges tenants and landlords face.

Projected Housing Shortfall: A Need for 3.5 Million Homes by 2030

The estimated housing supply gap, projecting a need for 3.5 million more homes by 2030, emphasizes the urgent need for strategies addressing shortages in both the rental and ownership sectors. Addressing this gap is vital to improving affordability, requiring increased housing supply. This crisis is driven by factors such as population growth, urbanization, and changing household structures, creating challenges for policymakers to balance housing development with affordability. Expect this issue to stay a priority for all levels of government well into 2024 and beyond, as it is not a problem that can be quickly resolved in the near future.

Approaching mortgage renewals is a focal point:  

It’s estimated that about $331 billion in mortgages will come up for renewal in 2024, with another $352 billion worth in 2025.  As a result, many Canadians will soon face a significant increase in their monthly mortgage payment—a major expense—and will have to adjust their spending. With that said, many lenders are going to be competing for your business.  Working with professionals with access to multiple lenders is essential, allowing for better rates and products.  It will also be important to get ahead of your renewal so you can adjust the family budget for a certain increase in your monthly mortgage payment. 

What this all means for you:

In 2024, prospective homebuyers, especially first-time buyers, will experience more favourable conditions due to anticipated declining mortgage rates. These reduced rates will improve your ability to qualify for larger mortgages, which was a significant hurdle in 2023.  It's important to note that as rates decrease, demand typically will increase, which in turn puts upward pressure on sale prices.  Mortgage professionals can help you be strategic with mortgage rates and terms so you can access the market now while still having the ability to go after lower rates once available. I look forward to providing you with content that will be both informative and useful throughout this year and as always, I am here to help you make informed decisions in the real estate market.

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I am a Victoria-based local realtor with eXp Realty. My commitment to honesty, integrity, loyalty, and hard work have been essential pillars for me because they drive a high standard of excellent service for my clients. Helping you realize your dream is my goal!

I service Vancouver Island, but my focus is on Victoria, Sooke, Saanich, Malahat, Shawnigan Lake, Cobble Hill, Duncan, and the rest of the Cowichan Valley.



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