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(February 27, 2024)

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From all indications, it’s evident that we’ve reached the peak of the rising interest rate trajectory, with the prevailing sentiment in Canada now leaning towards a ‘higher for longer’ stance. Yet, as the economy experiences a slowdown and inflation is primarily fueled by the shelter component—rent and mortgage payments—maintaining higher rates for an extended period poses a delicate balancing act for the Bank of Canada. While elevated rates may facilitate a more direct path towards achieving the 2% inflation target, they come at the expense of federal, provincial, and municipal governments, businesses, and the average Canadian consumer, all of whom are grappling with the burden of exceedingly high debt servicing payments. With Canada’s general consumer Prime Rate currently at 7.20%, the anticipation of relief couldn’t be more urgent for variable rate mortgage holders across the country. With seven interest rate announcements scheduled for 2024 (the next one slated for March 6), speculation abounds as to when the cuts will commence. The prevailing consensus suggests June as the starting point, while a smaller contingent believes relief could arrive as early as April. Regardless, it’s reasonable to expect relief is forthcoming, leaving the only lingering question: when will it materialize? In the interim, the fixed-rate market is adjusting, with prevailing rate sentiment being factored in daily. Stay nimble and vigilant, as fixed rates have already begun their descent.

DISCLAIMER: Rates are coming down, but it will be a zig-zag type of descent. Be prepared for potential fluctuations in rates during your decision-making process. Call right now or schedule a call with Marko Gelo to discuss your options.

Beyond the interest rate narrative, several noteworthy developments continue to exert pressure on the Canadian real estate landscape:

Alberta’s attractiveness for homebuyers seeking affordability and urban living options has surged. In 2023, Alberta set records with the addition of 56,245 people from other provinces and 112,562 from around the globe. British Columbia also set some multi-decade milestones with both interprovincial migration and international migrants. Incoming residents from other provinces declined to a 20-year low as BC saw most of its exodus depart to neighbouring Alberta. However, any loss to other provinces was quickly negated by the +150,000 international migrants that made their way to mostly Vancouver. These population boosts will continue to press demand in both BC and Alberta for the foreseeable future.
inflation has moderated to 2.9%, outpacing consensus estimates (of 3.3%), driven by declines in gas and clothing prices but tempered by substantial increases in shelter costs (rent and mortgage payments).
A generational shift is underway, with millennials surpassing baby boomers in population size, while Gen Z emerges as a formidable demographic force. As of last summer, millennials (1981-1996) surpassed the longstanding demographic leaders in Canada, the baby boomers (1946-1965). Look for this trend to continue to influence the shape and pace of real estate development across Canada. And right on the heels of the millennials are the Gen Z’ers, who are currently on pace to overtake all demographics by as early as 2038.
BC has sounded the alarm bells for housing affordability with its aggressive province-wide upzoning initiative. This initiative essentially allows every residential property to upzone to at least a duplex and as high as a 6-unit multifamily complex, depending on your lot size and proximity to public transportation routes. Calgary is also in the midst of implementing an aggressive zoning revamp of their own. These sudden announcements and aggressive timelines for concepts that are traditionally entrenched with time-consuming approval and study processes give you an idea of how dire the circumstances have become in Western Canada’s housing scene.
Meanwhile, China’s economic evolution presents challenges for global green initiatives, as the nation’s dependence on fossil fuels remains entrenched despite strides towards renewable energy adoption. In 1981, 97% of China’s population was living in poverty. Today, that number has shrunk to 1%. This type of transition is also prevalent in other places around the world like India. This substantial increase in personal net worth from politically unstable and undesirable parts of the world will only increase the flow of immigrants into Canada seeking a higher quality of life for years to come.

Wondering how you fit in today’s real estate landscape? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko. You can also call Marko on WhatsApp.

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