As we bid farewell to 2023, the burning question on everyone's mind is: what lies ahead for the Quebec real estate market in 2024? Buckle up as we take a deep dive into the crystal ball and explore the possibilities.
Review of the Quebec Real Estate Market in 2023
When we made our predictions for 2023, we anticipated a slow recovery for the market in the post-pandemic era. Unfortunately, the residential real estate market didn't have the best year.
Rising Interest Rates
One significant factor that impacted the market in 2023 was the surge in interest rates. The Bank of Canada's benchmark interest rate, also known as the overnight rate target, played a crucial role in this increase. As this rate went up, so did mortgage rates, making it more expensive for borrowers.
Construction on the Decline
Residential construction took a hit in 2023. Data from the Canada Mortgage and Housing Corporation (CMHC) revealed a sharp decline in construction activity, particularly in the Montreal Metropolitan Area (CMA). Housing starts in the CMA were down by a staggering 58% in the first half of the year.
Rising Prices
Housing affordability remained a challenge in 2023, with prices reaching new heights. According to a study by real estate agency Royal LePage, there was an 8% year-end price increase in the fourth quarter of 2023 compared to the same period in 2022.
How Will Real Estate Perform in 2024?
After reflecting on the past year, it's only natural to wonder about the future. Several key factors will shape the real estate sector in 2024, including interest rates, mortgage renewals, construction, number of transactions, and real estate prices.
What We Already Know
Certain trends have already started to unfold for the coming year. Here are two key facts that will impact the market:
Mortgage Renewals Will Be More Expensive
As interest rates continue to rise, many homeowners will face the need to renew their mortgages in 2024. This, in turn, will lead to higher monthly payments. According to the Canada Mortgage and Housing Corporation (CMHC), homeowners in Canada will have to pay an additional $15 billion when renewing their mortgages between 2024 and 2025.
Higher Taxes for Homeowners
Montreal homeowners recently received news of an impending tax increase. Residential property owners can expect a 4.9% hike, while non-residential property owners will face a 4.6% increase. Some municipalities in Quebec, such as Saint-Jérôme, Lévis, and Saint-Jean-sur-Richelieu, announced even larger tax increases. Quebec City, on the other hand, limited its increase to 3.9%.
Our Predictions for 2024
Now, let's gaze into the future and see what awaits the Quebec real estate market in 2024.
Longer Loan Terms
In 2024, we expect to see a continuation of the trend of longer amortization periods for new mortgages. Borrowers are looking for ways to lower their monthly payments, and extending the loan term is one way to achieve this. The share of mortgages with terms exceeding 25 years has been on the rise, reaching two-thirds in the first half of 2023.
Fewer Insured Loans
The share of uninsured loans has been increasing, indicating that borrowers are taking on more risk to access homeownership. The tightening requirements for mortgage insurance have contributed to this shift.
Lower Interest Rates
Many experts predict a decline in interest rates in 2024. Statistics Canada and the Association des professionnels de la construction et de l'habitation du Québec (APCHQ) both foresee a decrease in mortgage rates, provided certain factors, such as better inflation anticipation and a reduction in the federal funds rate, fall into place.
Decline in Transactions
The City of Montreal anticipates a decrease in revenue from transfer taxes, which suggests a decline in the number of transactions. State-wide data indicates a year-over-year decrease of 7.1% in sales in October 2023. The market's recovery remains uncertain.
Will Prices Fall?
The experts have mixed opinions on home prices in 2024. The Royal LePage agency predicts a modest 7.9% increase in house prices across Canada. However, a study by TD Bank suggests a 10% decline, mainly concentrated in Ontario and British Columbia. For Quebec, a significant drop in housing prices is not yet on the horizon.
Construction Will Pick Up but Remain Insufficient
The persistent high demand in the housing market can be attributed to the low level of construction in the residential sector. While the APCHQ predicts an increase in new housing starts by 15% in Quebec for 2024, the pace of construction is still considered insufficient. Demand will continue to outstrip supply, especially in major cities.
What About Inflation?
The Quebec Ministry of Finance forecasts a 2.71% increase in inflation for 2024. While slower than the previous year, this growth will continue to put pressure on household expenses.
Looking to Buy or Sell a Home in 2024?
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