While the start of 2024 has been relatively slow for the real estate market, the BC Real Estate Association (BCREA) is optimistic that home sales will pick up by the end of the year.
According to their latest economic outlook, the key factor everyone is watching is the Bank of Canada’s interest rates and when they might start to drop. This is crucial as buyer confidence appears to be closely tied to the Bank of Canada's policy decisions. Even though Canadian five-year fixed mortgage rates have dropped significantly from over 6% in late 2023 to 5.09% in the first quarter of this year, home sales in BC are still tracking at a modest annual rate of 65,000 units, similar to the pace seen in the first quarter of last year.
The main question now is not if, but when and by how much the Bank of Canada will lower its policy rate. This will largely depend on the evolving Canadian economy and inflation trends in the coming months.
The Lower Mainland is often referred to as the “engine room” of BC’s economy, balancing out the underperformance of other regions. However, affordability in Greater Vancouver continues to be a major concern. Despite this, the BCREA forecasts that a combination of falling fixed mortgage rates and strong population growth will drive higher sales by the end of the year. Specifically, they anticipate a 7.3% increase in sales in Greater Vancouver, 7.4% in the Fraser Valley, and 8.1% in Chilliwack.
While price growth in the region is expected to remain muted as listings normalize after a 20-year low in 2023, the more affordable areas of the Lower Mainland are expected to see price increases of 4% or more by 2025, fueled by falling interest rates and a recovering economy.
The BCREA predicts that the Bank of Canada will begin cutting interest rates in June, with up to 100 basis points of cuts by the end of 2024. This should result in a boost in home sales in the latter half of the year, potentially rising 6.9% over last year and carrying strong momentum into 2025.
