What’s coming in 2023
After a quiet December in real estate we are looking forward to what is ahead in our real estate market. What happens over the next 6-12 months will largely depend on interest rates (we will have a good idea of what Q1 will look like once the BoC makes the rate announcement on January 25th). The market has been quite frozen over the past 6 months (generally speaking sellers have not wanted to list, and buyers have not wanted to buy), and that means there is a lot of pent up activity waiting to happen. An interest hold on January 25th could be the catalyst for that pent up activity to engage, or it could take a sideways market for several more months before buyers and sellers start getting active again. Unfortunately nobody has a crystal ball to know what exactly will unfold this year. One thing is for sure, the Bank of Canada is nearing the end of this rate-hike cycle, and may even be there already (we’ll see on the 25th). To further that, rate relief could be on its way later this year. Some economists believe the Bank could start cutting rates before the end of the year, which would be a major catalyst for our market. We’ve read several economists who feel that interest rates will be lower in 2024 than they are today, but perhaps we may see a 25bps increase later this month. Time will tell.
Our best guess is that our market picks up at some point this year, but when that happens will largely be determined by interest rates. A January 25th rate hold could do it, along with the typical strong ‘Spring Market’ which starts in February in Vancouver, or it may take until the second half of this before rates stabilize (with the potential for a rate drop late 2023 or early 2024) before our market wakes up again. We are already starting to see more activity this week than we’ve seen in the previous few months. Buyer’s seem to be coming back into the fold earlier this year than what we’ve typically seen for early January, which makes us cautiously optimistic (we’ve sold three homes so far this year which is a great start). Once ‘potential sellers’ start seeing activity happen, we feel they will be more motivated to get their homes on the market, which gives buyers more options to choose from. We will see what happens first (increased buyer activity, or increased inventory), but one (or both) of those should happen early this year and hopefully contribute to the other factors above to help ‘thaw’ our frozen market.
Where will buyers come from in this new market?
With recent lack of success in the stock market many equity holders, primarily baby boomers are going to continue to help their adult children purchase homes. Given the state of higher interest rates our prediction is that the size of these family loans/gifts are going to continue to grow in size and frequency. Many economists are predicting that this transfer of wealth will only continue in the coming years.
In addition to that, immigrants will play a major role in our market. Canada added just over 437,000 new permanent residents in 2022, according to Immigration, Refugees and Citizenship Canada (IRCC). This topped the department’s target for the year, as well as the previous high of 405,000 reached in 2021. The bulk of these immigrants are coming from India, China and the Philippines. Looking forward, the government of Canada is predicting nearly 1,500,000 new permanent residents over the next three years. This flood of new permanent residents is expected to bring new homebuyers and renters to communities across the country with a large percentage of those coming to the Lower Mainland. That could increase activity in the residential real estate market, which has slowed since early last year, when borrowing costs jumped with a rise in interest rates.
If you are interested in having an up to date market consultation as it relates to your situation don’t hesitate to touch base with us or pop by our cozy office and we’ll make you a warm coffee or tea!
Sincerely,
Patrick, Devin & The Roch & Weeks Real Estate Group.