Challenges and Opportunities in the Canadian Real Estate Sector

The real estate sector faces several key challenges and opportunities in the near term:

Challenges:

• Affordability constraints remain a major issue, especially in high-demand urban markets, limiting sales and price growth in those areas. This is compounded by high household debt and rising mortgage renewal rates, which may increase defaults and tighten credit availability.
• Mortgage renewals at higher interest rates pose risks for many homeowners, potentially leading to increased defaults and broader economic impacts.
• Slower sales and price growth are expected in markets with acute affordability problems and high inventory levels, particularly in some major provinces.
• Rental affordability continues to be a challenge despite increasing supply, as incomes take time to catch up with rent increases.
• Labour market fragility and immigration policy changes may constrain housing demand and market recovery.

Opportunities:

• Price growth is expected to resume in more affordable regions, driving sales recovery and investment interest, especially in multi-unit and rental housing developments.
• Younger generations (Millennials and Gen Z) are becoming more active buyers due to expected interest rate declines, rising wages, and easier mortgage access, which could stimulate demand.
• Rental market rebalancing with increased supply and shifting tenant preferences may open up more affordable rental options over time.
• Economic improvements such as job market recovery and income growth will enhance housing attainability compared to recent years.
• New housing starts, particularly in rental and condominium sectors, are forecast to increase, supporting market activity.

Overall, the sector is navigating a complex environment of affordability pressures, demographic shifts, and economic uncertainties, but recovery prospects are stronger in more affordable markets and segments like rentals and younger buyer cohorts.