– After a pivotal 2023, forecasts point to growth in the real estate market in 2024 – Seasonal cycles should resume in the market – Accessibility of capital is a major market challenge in 2024 – Lower interest rates expected to have a positive impact on prices and the market – ESG, industrial, multi-family and retail real estate are the stocks to watch in 2024.
Despite the stabilization of high interest rates after a year of uncertainty, buyers are gradually adjusting to the idea that this economic landscape may persist.
However, as is evident in grocery stores, gas stations and restaurants, prices have risen considerably. This has increased buyers’ price sensitivity and concerns about being overcharged in property purchases. In my experience, properties in my inventory have remained on the market for weeks without visits, mainly because they were overvalued by 3 to 5%. A price adjustment usually generates renewed interest from buyers, underlining the crucial importance of pricing properties right.
Real estate statistics 2023-2024
Seasonal real estate cycles 2024
Accessibility of capital
Influence of interest rates and real estate 2024
2024 real estate investment tips
2024 real estate market forecasts
Real estate statistics 2023 – 2024
2023 was a pivotal year for the real estate market. Despite strong shocks that prompted players to exercise caution, by the end of 2023 we saw the first signs of market recovery, which were confirmed in the early months of 2024.
This trend, supported by macro-economic conditions that are tending to ease and the return of various players to the sector after a resilient passage through economic turbulence, promises bright prospects for the 2024 real estate market.
As a result, the real estate market, which is poised for growth in the year ahead, has definitely returned to good economic health, and should guarantee decent growth at the end of the year.
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Seasonal real estate cycles 2024
The momentum of the real estate market has always been influenced by seasonality, a trend disrupted by the pandemic due to a bottleneck caused by limited inventory and an overflow of buyers, allowing properties to sell consistently throughout the year.
This model is changing, and I anticipate a return to a more traditional market where seasonality impacts sales. February has shown a promising start, with sales up 37% on February 2023, and March is on track to surpass last year’s figures. However, a slowdown during the summer months is expected as early 2024 buyers settle into their new homes. The era of endless buyers is over, and it’s important to communicate this to sellers to avoid properties languishing on the market until summer.
“Properties that remain unsold for long periods may attract lower bids due to a perception of desperation.”
Kyle Shapcott
Accessibility of capital
Trends in the availability of capital remain one of the key issues for 2024.
Indeed, the Canadian citizens expect the supply of various types of debt and equity capital to be restricted compared to 2023 and previous years, which will increase the financing challenges facing Canadian real estate companies and affect their investment strategies and development plans in 2024.
Discover this financing challenge in graphic form :
Loan capital for acquisitions :
Loan capital for acquisitions :
A sound financing strategy is essential to prosper in the 2024 real estate market, at the risk of missing opportunities or impacting the profitability of your investment.
Influence of interest rates and real estate 2024
Bank of Canada rate cuts
The Bank of Canada is likely to cut rates later than expected, probably in the second half of the year. Even so, I don’t expect rate cuts to be a silver bullet for the market. Interest rates around 5% seem to be the threshold for re-engaging buyers.
“Expect a gradual recovery rather than the volatile fluctuations seen in the past.“
Kyle Shapcott
However, this decision should reassure the market and confirm its growth for 2024. With this anticipated drop, buyers seem to have integrated and accepted this new rate threshold, for which their interest in the market remains relevant.
2024 real estate investment tips
Thriving in the median
Various market segments outperformed on an annual basis.
For example, during the pandemic, single-family homes outnumbered small condos in downtown areas as the work-at-home trend took over. This trend continues, with mid-range and entry-level price points outperforming the high-end market.
Consumers are reluctant to take on more debt for the luxury of a larger home, concentrating instead on satisfying their basic needs. This trend is set to continue until 2025.
Diversifying your inventory is essential to sustaining a business in 2024 and beyond.
“While specializing in a particular area or neighborhood is beneficial, having a diverse inventory is crucial to long-term success.”
Kyle Shapcott
Real estate sectors to invest in
The trend towards ESG compliance
The PWC report states that current societal challenges are prompting companies to respond to key trends such as environmental, social and governance (ESG) issues, which remain important to some respondents as a means of creating value.
The Canadian real estate sector’s ESG priorities continue to evolve, sometimes with the impression that attention to ESG issues has diminished due to current economic pressures. On the other hand, many respondents to the PWC survey believe that the importance of ESG performance has increased.
While some companies may prefer a slower approach for the time being, there are many reasons to remain proactive in this area, such as the evolving regulatory environment, which is tending towards greater transparency and commitment to ESG indicators in the future.
While some companies may prefer a slower approach for the time being, there are many reasons to remain proactive in this area, such as the evolving regulatory environment, which is tending towards greater transparency and commitment to ESG indicators in the future.
ESG issues remain important, as it is increasingly clear that companies and investors see them as strategic levers for creating value.
This can be translated into :
Mitigating the range of risks associated with environmental issues such as climate change.
The benefits associated with more sustainable buildings, including higher rents and lower operating costs thanks to energy efficiency.
For companies adopting a more measured approach to environmental and social issues in the face of growing commercial pressures, it’s useful to consider how the technological tools for ESG reportingSolutions and incentives for sustainable buildings and partnerships can help them make further progress in this area.
Investment property values 2024
The PWC report identifies three key opportunities for investment in the sector: industrial real estate, multi-family housing and retail.
There is also a noticeable interest in debt funds, which attracted many of the people surveyed this year.
Let’s take a closer look at these three values:
Industrial real estate: This segment remains a safe bet, despite a rather cautious outlook.
With prices for these properties established and the recent rapid pace of rental growth unlikely to continue, confidence in this asset class is lower than in previous years.
However, given the very low vacancy rates across Canada, industry players still see opportunities in industrial buildings.
Multi-family housing: Despite project delays or cancellations reflecting the challenges associated with the multi-family housing asset class, this segment boasts solid fundamentals.
The players are optimistic despite the current difficulties linked to costs and financing.
The federal government’s recent announcement to eliminate the GST on new construction and the niche opportunities in the multi-residential segment, such as student and seniors housing, are driving Canadians towards this type of investment.
Necessity-oriented retailing:This segment of the retail market is perhaps the most surprising addition to this year’s list of sure things.
Overall, confidence in the retail asset class has improved considerably, especially for properties anchored by grocery stores and serving communities with strong population growth.
Community and neighborhood shopping centers ranked particularly highly in terms of investment prospects.
2024 real estate market forecasts
In his latest PWC report, respondents say that recent trends, including rising interest rates and the increasing cost and scarcity of capital, are continuing to intensify, respondents were generally confident about the overall appetite for real estate, many of them indicating that Canada’s demographic growth, fuelled by immigration, is proving to be a source of long-term strength for the sector.
Challenges and risks of the 2024 real estate market
Costs, transactions and capital markets
There is a feeling of uncertainty among market players in terms of prices for 2024. This uncertainty is proving to be the main factor holding stakeholders back from taking action in the market at the start of the year.
Despite recent positive signs, the current period is still shrouded in uncertainty, with players reluctant to enter the market due to a general lack of economic, social and geopolitical confidence.
Among the factors holding back the sector’s activities are :
Interest rates are likely to remain high for some time to come.
Rising financing costs.
Reduced capital available for real estate.
Cost pressures and labor shortages continue to worsen.
Faced with these challenges, real estate players are also taking a close look at other ways of creating value, such as strategically repositioning their portfolios, optimizing their assets through further investment in digital transformation, and exploring the possibilities offered by generative artificial intelligence.
Accessibility crisis
Current trends in residential construction and the pace of population growth have heightened concerns about housing affordability in 2023, and should continue to do so in 2024.
The need to increase the supply of housing is increasingly recognized throughout the country, and political representatives have begun to respond with policy changes. Let’s take a look at the main measures taken to solve this crisis:
Some provinces have also introduced measures to simplify approval of new projects.
The federal government has announced its intention to abolish the goods and services tax for new special-purpose rental housing projects, a move the sector is closely monitoring given the possibility that such a change could also be applied to provincial sales taxes.
Highly affordable housing for low-income Canadians and accessible housing suitable for a wider range of buyers and renters are also key issues for the sector. Both types of housing are in short supply and require support measures, solutions and incentives tailored to needs and circumstances.
Trends and price analyses
Royal LePage’s latest price analysis forecasts a 5.5% rise in property prices. Analysts at the highly respected media outlet forecast this increase from the fourth quarter of 2024, with the median price of a detached single-family home and a condominium set to rise by 6% and 5% respectively, to $879,164 and $616,140.
Prices should rise from the second half of the year onwards, until they reach their pandemic peak in the first quarter of 2022, supported by the easing of monetary policy, which should lead to lower rates.
Montreal real estate price trends
In Greater Montreal, the price of a property in the fourth quarter of 2024 is expected to increase by 5% over the fourth quarter of 2023, to $610,260.
At the same time, the median price of a single-family detached home should rise by 4.5% to $684,998, while that of a condominium should increase by 6% to $471,912.
At a price of $471,912, a young couple with a $50,000 down payment would have to take out a loan of $434,991, including mortgage insurance. At a fixed rate of 5% for 5 years, they will have to pay $2,530 per month for their condo. With a gross income of $100,000, the household will spend 30% on its condo; 35% if you add insurance, taxes and heating.
In terms of number of transactions, we’re not expecting a big increase in volume, a little more than in 2023, but nothing like what we saw in 2022 and 2021.
In any case, the market remains unpredictable and there is no consensus on price trends. In contrast to Royal LePage, RE/MAX predicted in November 2023 stable prices in Quebec City in 2024 and a shift in market power towards buyers in Montreal.
Conclusion
In conclusion, the real estate market of 2024 navigates between adaptation and innovation, marked by significant factors such as the evolution of interest rates, the importance of sustainability and the diversification of investment strategies.
Despite persistent challenges, opportunities abound for savvy players ready to adjust to this changing landscape. As we move forward, keeping an eye on macro-economic and sectoral developments will prove crucial to capitalizing on the real estate market’s growth potential in 2024 and beyond.
If you would like to receive assistance with your real estate project, contact our team of Montréal real estate brokers.
Kyle has been an expert in the real estate market for over 10 years, and is passionate about Montreal and the city’s real estate sector. He regularly shares his analysis and advice in his Linkedin articles and on our blog to keep you up to date with market developments.
