the rennie outlook 2024

RENNIE OUTLOOK 2024

Here we are again at the beginning of a new year, with cautious but palpable optimism abounding as it relates to housing markets both across the country and here within British Columbia.

And why wouldn’t there be?

We’re coming up on two years of quickly-rising and then elevated-above-the-norm interest rates, a feature of our economy that arose because inflation ran way too hot. Inflation has abated in a major way but, to be fair, it’s still warm to the touch—which is why the Bank of Canada has yet to begin unwinding the rate hikes it began in 2022. Having said that, inflation is set to return to room temperature in the coming months, rate cuts are on the horizon, home sales are destined to pick up, and the economy will soon have some life breathed into it—well, at least by the end of the year. In this edition of the rennie outlook , we provide our predictions of these features of our economy and housing market, along with many others. And as we’ve said before, the value of the predictions contained herein is not merely as inputs into pro formas and business plans, but—perhaps most importantly—there is value in the assumptions and context that we present that inform our expectations for the housing market and macroeconomy. With that in mind, we hope that this report can be the basis for constructive conversation and debate about how our market is evolving.

table of contents.

3 INTRO

4 HOUSING: SALES, PRICES, & RENTS

5 DEMOGRAPHICS

7 JOBS, INFLATION

Thanks for reading.

Ryan Berlin Senior Economist & Vice President of Intelligence rberlin@rennie.com

RyanWyse Lead Analyst & Market Intelligence Manager rwyse@rennie.com

Copyright © 2024 rennie group of companies. All rights reserved. This material may not be reproduced or distributed, in whole or in part, without the prior written permission of the rennie group of companies. Current as of February 5, 2024. Data from the Greater Vancouver and Fraser Valley Boards, Statistics Canada, Zonda Urban, CMHC, & rennie. While the information and data contained herein has been obtained from sources deemed reliable, accuracy cannot be guaranteed. rennie group of companies does not assume responsibility or liability for any inaccuracies. The recipient of the information should take steps as the recipient may deem necessary to verify the information prior to placing any reliance upon the information. The information contained within this report should not be used as an opinion of value, such opinions should and can be obtained from a rennie and associates advisor. All information is subject to change and any property may be withdrawn from the market at any time without notice or obligation to the recipient from rennie group of companies. E.&O.E. 2

RENNIE OUTLOOK 2024

housing: clarity on rates leads to increased buying activity

RESALES

As expected, 2023 was a challenging year for Metro Vancouver’s housing market. After beginning the year with interest rates already at their highest in a generation, additional hikes put the brakes on demand and further eroded affordability for buyers. Our prediction of decreasing transaction counts in 2023 ultimately proved correct, though MLS sales sagged slightly more than we expected, to 40,000.

The trajectory for resale counts is expected to be upward-sloping in 2024, with the second half of the year benefiting from interest rate cuts from the Bank of Canada.

OUR 2024 OUTLOOK

Pent-up demand in the Vancouver Region’s housing market will bring increasing sales counts as interest rates decline, with a total of 49,000 MLS sales predicted for the year—23% more than in 2023. We expect sales to reach 15,000 for detached homes, 10,000 for townhomes, and 24,000 for condos.

PRE-SALES

The pre-sale market was affected by the same macroeconomic challenges as the resale segment and the results were similar—namely, that buyers largely pulled back amidst high interest rates and an uncertain future. Ultimately, the region tallied just over 11,500 pre-sales last year, which was 20% fewer than in 2022 and 25% below the past 10-year average.

The expectation for the year ahead is a pre-sale market that improves as the year progresses, alongside increasing resale counts and prices, and decreasing mortgage rates.

OUR 2024 OUTLOOK

We expect Metro Vancouver’s pre-sale market to be more robust in 2024 than in 2023, with slightly more activity in H2 than in H1. Overall, we anticipate a total of 13,000 pre-sales this year, including 6,000 concrete homes, 4,500 woodframe homes, and 2,500 townhomes.

RENNIE OUTLOOK 2024

HOUSING STARTS

Last year we predicted an increase in housing starts in Metro Vancouver (to 27,900); ultimately, we were too conservative, with 2023 tallying just over 33,000—a record high, and a 28% increase over 2022.

Based on the number of building permits issued over the past couple of years and recently pre-sold multi-family projects, we expect another year of relatively robust construction activity. That said, the data point to a decrease in starts next year relative to the record-setting pace of 2023.

OUR 2024 OUTLOOK

While we expect a 10% decline in housing starts in Metro Vancouver in 2024 compared to 2023—to 29,900—this would represent the second-highest annual total in the region’s history.

HOUSING COMPLETIONS

While Metro Vancouver may have started construction on a record number of homes in 2023, the number of homes completed actually declined from 2022. This is mainly due to the fact that the vast majority of homes constructed today are in apartment formats—and they take a long time to build. Last year saw just 20,800 completions, a 3% decline from 2022, while we had predicted a modest increase in 2023. With so many housing starts of late, there is now more under-construction inventory in Metro Vancouver than ever before, and we do expect this to translate into an increase in housing completions in 2024, meaning more homes being delivered to residents of the region.

OUR 2024 OUTLOOK

Based on previous years’ starts counts and the current inventory of homes under construction, we predict housing completions in Metro Vancouver will total 25,000 in 2024, which would be a 21% increase over 2023.

RENNIE OUTLOOK 2024

prices and rents: more modest increases ahead

HOME PRICES

It was a bit of a roller-coaster ride for home values in 2023. After bottoming out at the end of 2022, benchmark MLS condo prices rebounded quickly and rose through the first half of the year, reaching 98% of their 2022 peak before interest rate increases from the Bank of Canada in June and July cooled demand and beat back values during much of the second half of the year. Detached home benchmark prices followed a similar path, albeit to a lesser extent than condos. With interest rate cuts on the horizon and pent-up demand ready to re-ignite the market, we expect values to begin rising again in 2024.

OUR 2024 OUTLOOK

We expect benchmark MLS condo prices to recover to their 2022 peak by November, and increase by 4% overall in 2024. For detached homes, we see a larger increase in 2024 (of 9%) but still finishing the year below their 2022 peak level.

RENNIE OUTLOOK 2024

MONTHLY RENTS

The rental market in Metro Vancouver has experienced a significant amount of pressure of late: from record-setting population growth to fewer first-time buyers entering the for-sale market, demand has outpaced supply of late, even as purpose-built rental housing construction has expanded. That has led to a vacancy rate of less than 1% in Metro Vancouver alongside rapidly rising rental rates. Expect more of the same in 2024, though to a lesser extent.

OUR 2024 OUTLOOK

By the end of 2024 we expect that average advertised asking rents in Metro Vancouver will, on a year-over-year basis, be 3% higher, with monthly rent for studios averaging $2,600, 1-beds $2,900, and 2-beds $3,500.

RENNIE OUTLOOK 2024

demographics: the beat goes on

TOTAL POPULATION

After setting a record for population growth in 2022—by adding more than 930,000 people—Canada should have been poised for some reversion to the mean in 2023…right? Maybe so, but that’s not how things played out. While full-year 2023 figures won’t be in until the spring, we estimate (based on the three quarters of data we do have, supplemented with information from Immigration, Refugees, and Citizenship Canada) that Canada added 1.2 million people last year—another new record that is unlikely to be matched in 2024, thanks in part to the new cap on student visas. Regardless, Metro Vancouver is set for another year of robust population growth in the year ahead.

OUR 2024 OUTLOOK

On the back of robust inflows of net international migrants, we expect Metro Vancouver to add 80,000 residents in 2024, nudging its population closer to the 3-million mark. While high in a historical context, growth of this magnitude would be less than that of 2023.

IMMIGRATION

In November 2023, Canada’s federal government extended its annual permanent resident (PR) target one additional year, with the aim of adding 485,000 PRs in 2024, 500,000 in 2025, and another 500,000 again in 2026. With Metro Vancouver accommodating approximately one of every eight new permanent residents, it’s positioned to welcome an influx of PRs who will both contribute to the local economy and necessitate a commensurate addition of homes to the existing dwelling stock.

OUR 2024 OUTLOOK

A new, higher national immigration target in 2024 will be accompanied by continued growth in Canada’s metro areas. Metro Vancouver will experience this first-hand as it adds 60,000 permanent residents this year—a new record.

RENNIE OUTLOOK 2024

DOMESTIC MIGRATION

During the first two-plus years following the onset of the pandemic, British Columbia was a magnet for movers within Canada (aka interprovincial migrants): indeed, the province added 60,000 people to its population from other parts of the country between Q2 2020 and Q2 2022–far out-pacing the number two province, Nova Scotia, which added 22,500 people. As the coastal bifurcation of domestic migration flows dissipated in the aftermath of that initial pandemic-fueled mad scramble to find a desirable place to live and work (remotely), BC has lost 13,000 people to other parts of the country on a net basis.

While the trend of net population outflows from BC is expected to wane going forward, concerns around affordability and accessibility will continue to see Metro Vancouver shed people to other parts of the province.

OUR 2024 OUTLOOK

As housing markets stabilize in response to falling interest rates, Metro Vancouver will see recent people outflows to other provinces slow and reverse, with full-year net interprovincial migration expected to neither add to nor take away from the region’s population. In contrast, we expect slightly more than 14,000 people to leave Metro Vancouver for other parts of BC in 2024—a level consistent with that of the past seven years.

RENNIE OUTLOOK 2024

jobs, wages, inflation, & rates: on the path to normalcy

EMPLOYMENT

Since the wild swings in employment experienced during the first two years of the pandemic—when the number of jobs in Metro Vancouver first fell by 124,3oo in 2020 before rebounding by 118,100 in 2021—the region’s job base has grown more steadily, adding 39,500 jobs in 2022 and another 37,400 in 2023. While overall positive, Metro Vancouver’s job base hasn’t kept pace with what has been rapid population growth, with the regional employment rate (the proportion of people aged 15+ who are working), at 64.7%, remaining below its pre-pandemic level of 65.8%.

OUR 2024 OUTLOOK

Supported by record international in-migration and an eventually-rebounding economy thanks (in part) to falling interest rates, we expect the number of jobs in Metro Vancouver to grow by 33,000 in 2024. A rising unemployment rate in the first half of the year will serve to mitigate greater job expansion.

RENNIE OUTLOOK 2024

UNEMPLOYMENT

Quickly-rising and higher interest rates have been doing their job of late, dampening economic growth and slowing the labour market. Indeed, over the past half-year, employment growth has been throttled, the number of unemployed people and the unemployment rate have risen, job vacancies have diminished, the number of EI claimants has grown, and per capita retail sales and GDP have fallen. One factor driving slower overall growth (or lack of growth) is the slowdown in household spending due to higher borrowing costs. Indeed, higher rates create a disincentive to spend (and, further, to borrow to spend), while at the same time incentivizing savings. Moreover, homeowners continue to renew at higher rates, which re-routes what otherwise would be spending to interest payments to the bank.

OUR 2024 OUTLOOK

The disinflationary momentum that is well underway thanks to higher interest rates will continue for months to come, pushing unemployment rates in Canada up further. In Metro Vancouver, we expect the jobless rate to climb from its current 6.2% to 7.0% by mid-year, before ending 2024 at 6.7% on the back of what will be, at that time, a declining interest rate environment.

RENNIE OUTLOOK 2024

INFLATION

After peaking at 8.1% in the summer of 2022, Canada’s rate of consumer price inflation has fallen significantly, to 3.4% most recently. Of course, this leaves inflation on the outside looking in at the Bank of Canada’s target range of 1-3%, but it’s now just a matter of time before price changes, broadly-defined, settle into a more moderate pace of growth. Notably, shelter costs—which constitute 30% of the Consumer Price Index (CPI) basket of goods and services—are driving the current headline rate of inflation, with mortgage interest costs in particular rising in the neighbourhood of 30% on a year-over-year basis. Excluding this component of the CPI yields an “everything-else” inflation rate of 2.5%, with this rate having been below the 3% threshold for seven of the past eight months.

OUR 2024 OUTLOOK

Our baseline expectation for Canada’s inflation rate is for it to dive below 3% by Q2 2024, where inertia suggests it is likely to remain for the remainder of the year. While the high end of our estimates suggests inflation could poke past 3% as the year progresses, there will be enough moderation to pave the path for meaningful interest rate cuts.

RENNIE OUTLOOK 2024

WAGES

Wage growth was somewhat of a bad news story masquerading as good news in 2023. Wages finally outpaced inflation last year, which is undoubtedly a good thing for individual workers, however with average weekly earnings in British Columbia growing by 4.5% over the past 12 months, it remains a concern for the Bank of Canada in its efforts to get inflation back to 2%.

OUR 2024 OUTLOOK

With a labour market that is likely to soften further in 2024, we expect wage growth to moderate this year. In our view, annual wage growth will likely be in the 2.5-3.5% range by the end of 2024.

INTEREST RATES

The Bank of Canada continued on its unprecedented rate-tightening cycle in 2023. Beginning the year with a policy rate of 4.25%, the Bank increased its policy three times to 5.00% (a prediction we missed last year). The Bank has held that rate since its last increase in July, with a view that monetary policy is sufficiently restrictive to return inflation to target.

OUR 2024 OUTLOOK

With inflation sliding back inside the target range of 1-3%, we expect the Bank of Canada to cut its policy interest rate four times in 2024, finishing the year at 4.00%, with the first cut likely to come in April.

RENNIE OUTLOOK 2024

get the data. Inform your important real estate decisions with data. Register to receive our intelligence publications at intelligence.rennie.com or reach out to your rennie representative to get the data. THE RENNIE REVIEW is a detailed monthly report providing insights into sales, listings, and pricing trends throughout the Vancouver Region’s housing resale market. THE RENNIE ADVANCE is a brief monthly update on the latest regional sales and listings activity, produced the same morning as the previous month’s data are released.

THE RENNIE OUTLOOK is an annual compendium of housing, demographic, and economic predictions for the year ahead.

THE RENNIE LANDSCAPE is a semi-annual publication that tracks the myriad factors that directly and indirectly impact Metro Vancouver’s housing market.

THE RENNIE BRIEF is a topical research brief on issues relevant to our industry, as they emerge.

RENNIE INSIGHTS are in-depth research papers on a range of real estate, economic, land use, and planning policy forces that shape our communities.

THE RENNIE PODCAST presents engaging, insightful, and sometimes humourous discussions about everything real estate, for the real estate interested.

The rennie intelligence team comprises our senior economist as well as housing and data analysts who empower our developer clients, rennie advisors, institutional advisory clients, and the entire rennie team with comprehensive data and a trusted market perspective.

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