Canadian Real Estate Market Update – Q2 2024

Fiera Capital has increased its forecast for a “Soft Landing” scenario to a 55% probability over the next 12-18 months, reflecting optimism about successful inflation management and economic stability. This scenario would enable central banks to cut interest rates aggressively without causing a recession, positively impacting real estate valuations through declining interest rates, increased borrowing liquidity and accelerating economic growth. However, there is a risk of an “Inflation Revival” scenario, where unexpected growth and inflation could limit central banks’ ability to ease monetary policy in 2024.

Despite current challenges in the Canadian real estate market, particularly in the office segment, there are signs of recovery, with the first quarter of 2024 showing C$8.7 billion in investment volumes across 1,555 transactions. Although this represents a decline from the previous quarter, private Canadian investors remain active, accounting for 58.9% of acquisitions, and foreign investors continue to contribute significantly. The market’s adaptability and investor confidence in core sectors and strategic assets underscore a positive outlook. As the market recalibrates, opportunities for strategic investments and capital deployment remain encouraging, paving the way for potential growth in the coming quarters. Oxford Economics forecasts that Canadian real estate will lead the G7 in 2024 with a projected 4.6% total return. The latter half of 2024 should see renewed investment from institutional investors and pension funds as downward valuation pressures ease and access to capital improves.