In the last few weeks, we received news that inflation in Canada has come down again, and the BOC held the overnight rate. Fixed-rate mortgages have already started to fall, and according to almost every leading economist, it is a matter of time before the BOC starts lowering rates.

These are all positive signs, but what do they really mean — and what’s the timeline? Specifically in the new home real estate business: when will the market rebound, and what will it look like when it does?


We’ve been talking about supply for many months (here, here, here), so the first thing we can expect to see is an increase in project launches. In fact, this has already started.

By the numbers, we have already seen double the project launches this fall as we did last year, currently sitting at 40 since the BOC paused interest rates in early September — and 30 of those were in the last 10 weeks alone. And even as decorations went up and holidays started dominating everyone’s brains, new home sales activity is only just slowing down, one week out from Christmas.

As a rule of thumb, projects never launch on a long weekend, and generally November marks the trailing off of project launches to make way for the holidays. But this year, we saw four projects launch over the Remembrance Day long weekend… four. In addition, we have had one of our busiest Novembers ever when it comes to sales launches, and the bustle has continued into December; we are still launching projects at the time of this article’s publication.

READ: Expert: Market Demand Is ‘Strong, Stable, But Shifting Locations’

Admittedly, the majority of this activity has been on the west coast, as British Columbia continues to show more resilience than the Ontario market. But, we are seeing anecdotal evidence that developers in the GTA are preparing to leave the sidelines as well.


After a slower start to the fall market with tempered September sales, October picked up dramatically, resulting in almost double the number of firm sales YoY through our system. November and December are on track for a slightly higher number of sales YoY which means, with more launches, average absorptions are down as we close the year.

Digging into the specifics, it’s easy to see that well-priced competitive product is stealing sales from the less attractive projects, and there continue to be clear winners and losers in this market. The more accurate statement is that absorptions are way down for some projects, while others remain steady as we close the year.

The market clearly shows that developers must still move with pricing/product caution, as greed and product errors will be met with harsh repercussions — especially given the large pent-up supply will result in a more competitive market when it all starts moving through.


This is a topic we don’t often raise being a sales-focused platform. But today, it can not be ignored. It is true, many purchasers are finding it difficult to close. There is lots of talk of fall-out and default, although it doesn’t reflect in the numbers.

For the most part, it seems purchasers have been able to find the necessary financing to meet their closing commitments and avoid losing their very large deposits — which, on average, are 20% of the purchase price and measured in hundreds of thousands. Yes, their financing is likely way more costly than they had anticipated — forcing them to either sell something else, or immediately sell after closing — but the large majority are closing.

By the numbers, we do see a nominal increase in sales coming from older inventory, as far back as 2017, which suggests developers are having to resell problem files at closing. But in all cases, those homes have dramatically increased in value, and, combined with the confiscated deposits, are quickly resold for profit, even at discounts to current values.

There is a nominal increase in assignments but developers are clearly controlling this inventory through their reasonable right to decline a purchaser's request.

We expect sensational headlines of bankrupt developments will continue to be contained to just a small few who succumb to known industry mistakes.

What’s Ahead

As we look into our crystal ball, the question is: what will the first quarter of 2024 look like? To answer that question, we’ll look at the leading indicators.

What we know for sure — or can certainly expect — are the following:

  • All levels of government have finally engaged on the housing topic, and are actively trying to push projects forward in all asset classes.
  • Interest rates are expected to begin falling, which will lower the significant interest burden on projects to help make them feasible, and will make mortgage affordability more palatable on the sales side. Although this may not happen til Q2, presale buyers don’t have to close for several years, and projects launched in Q1 won’t start construction until several quarters ahead, so all the market needs is confidence in where things are going for us to see a change.
  • Inflation is coming down, so construction costs are flattening and starting to come down for some trades. This will also contribute to project feasibility and to launch confidence, although this is likely to be short lived as there is not nearly enough labour to meet the demands of government-backed housing initiatives (mentioned in point one above).
  • New immigrants continue to pour into the country, and demand for housing will likely remain strong for the next few years — at least.
  • Canadians continue to see the value in home ownership vs. high rents, as well as leveraging the investment value in their tax-free primary residence. So, despite increased government funding for rentals, condo developers will stay the course, at least in part to serve this more profitable market.

Our prediction is that the first quarter of 2024 will be slow and steady, recording marginal sales increases YoY and an increased number of projects readying for launch. We expect the first 25 bps rate cut to come as early as March 6, 2024, and not later than April 10, 2024, in time for the spring market — which we expect to be buoyant.

It is likely we will continue to see the suburban markets leading the charge, with downtown Vancouver, Calgary, and Toronto continuing to lag behind for some time. It is almost certain that prices will be higher in spring 2024 than they are today, as labour pressures will keep construction costs flat (at best), providing little relief to challenged proformas — which will already be taking any interest rate reduction gains and applying them straight to margin to find required profitability.

Potential Challenges

Challenges and wild cards to this thesis will be competition for city staff process approval time, with a flood of new government-backed developments entering the system. As already mentioned, construction labour will be similarly affected, and there will be a lag as the entire vendor community tries to ramp up from the skeleton teams they became while weathering the down market.

Finally, there is always the unknown of product design, as any development looking to launch early next year was designed in an entirely different market, and may not be suitable today, from a price point or utility perspective. A quick look at purchaser demographic data today vs. the peak tells us it’s wise to consider that the once extremely active Chinese migrant and buyer has found greener pastures; immigration is now dominated by South Asian newcomers and other discrete groups with their own unique preferences and needs. Similarly, the huge millennial and baby boomer populations, who form the majority of purchaser demographics, will be five years post-COVID, now in different stages of life, also with different housing requirements.

In the last year, the trend we have benefited from greatly at AVESDO is that developers will continue to look to their data to reveal and strategize against these important what-ifs.

Talk to an AVESDO Sales Advisor today to backstop your projects with a data-rich platform built around new home sales best practices, and take advantage of our new Deposits solution, ensuring you get paid faster, with lower costs, fewer errors, and less headaches.

This article is authored by Ben Smith, President of AVESDO: a Canadian software company harnessing the power of data to help real estate professionals make better, faster, and more informed sales decisions.


This article was produced in partnership with STOREYS Custom Studio.

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