This text is part of the special Personal Finance section
The significant increase in the key rate over the last two years has had a rather devastating effect on the real estate market. But 2024 promises to be more lenient: after the madness of the pandemic, then the lull, we expect a more balanced situation.
In 2023, the real estate market has slowed down a little, particularly after the last increase in the key rate made in July by the Bank of Canada, underlines real estate broker Georges Bardagi, director of the Bardagi Team at RE/MAX. “Last year, sales fell by 15%, in general, in Quebec — in number of transactions, not in prices, of course,” he specifies.
But the stagnation of interest rates in recent months (the key rate has remained at 5% since July) has stimulated demand, and we sense a resumption of interest, notes Mr. Bardagi.
This is also what Dominic St-Pierre, vice-president and general manager of Royal LePage for the province of Quebec, notes. “There are not more transactions being made, but there are more phone calls and visits,” he explains. We see that there is a new interest in real estate, but this has not yet translated into transactions. It should come around the second or third trimester. » Royal LePage predicts that the Bank of Canada will announce three successive reductions in the key rate over the next year, the first of which would take place in July.
“We expect that in April or May, the Bank will start to announce its colors, and we think that as soon as it starts to suggest that rate cuts are coming, the buyers will really return en masse to the market,” adds Mr. St-Pierre, who believes that the Bank of Canada probably has the objective of bringing back the key rate around 3.5%, in 2025.
Rising house prices
This is therefore good news for owners who have chosen a variable rate, and who have perhaps been tearing their hair out for two years, with each new increase in the key rate. But for first-time buyers, the good news will unfortunately be short-lived. Since if the key rate falls, demand will increase, which will create pressure on house prices.
According to Royal LePage, property prices in Greater Montreal are expected to increase by 5% in the fourth quarter of 2024, compared to the fourth quarter of 2023. In the rest of the province, the expected increase is between 4% and 5%, so than in the rest of Canada, it is more like 5.5%.
“Usually, there are big regional differences in the real estate market,” emphasizes Mr. St-Pierre. Before the pandemic, Montreal was in a fairly aggressive sellers’ market, but most other regions were in balanced markets or buyers’ markets. And now most are sellers’ markets. It is a reality that has become provincial, even national. »
The crux of the problem
The colossal problem of access to property is therefore unlikely to be resolved in 2024. Because in the background, an even more serious situation is well established: the housing crisis.
The demand for real estate is very high, as there simply aren’t enough properties to house everyone. It is therefore very unlikely that property prices (and rents) will not fall in 2024. “The only thing that will improve access to property is the creation of housing,” insists Dominic St-Pierre .
“It is estimated that around 250,000 more properties are needed in Quebec — not in the coming years; today, just to have some semblance of comfort in the market! he continues. And to maintain the rate of population growth, it would take us about 50,000 more new properties per year. »
All levels of government, as well as construction contractors, will have to sit down together to find solutions, believes Mr. St-Pierre. “It is certain that something will have to happen in the coming years, otherwise we will really hit a wall. »
In the meantime, those who have the means to buy property should do so as soon as possible, believes Georges Bardagi. “My daughter who wants to buy, I tell her: “buy right away, go to the notary in July, and between the two, probably the rates will drop more than what you currently have, so you will have good purchasing conditions”. »
This content was produced by the Special Publications team at Duty, relating to marketing. The writing of the Duty did not take part.