Experts predict Canadian home sales to reach the bottom in early 2023
A new report from TD Economics predicts Canada will see the weakest level of home sales since 2001 this year.
The housing market outlook from economist Rishi Sondhi attributes the prediction to the poorest affordability level since the late 80s and early 90s.
Sondhi is forecasting that home sales will reach their bottom sometime in early 2023, after declining 20 per cent from peak to trough.
He says steep annual average price declines are expected in most of the Atlantic provinces, Ontario and B.C. in 2023, while lesser drops will materialize across the Prairies and in Newfoundland and Labrador.
The Canadian Real Estate Association said last month that the actual national average home price was $632,802 in November, a 12 per cent decline from the same month last year.
November home sales totaled 30,135, a 39 per cent drop from a year prior.
After a series of interest rate hikes throughout 2022, the average price of a home in Canada has dropped by more than $180,000 since hitting its peak in last February.
This “softening” of the market represents a shift to more accurate home valuation, said Moshe Lander, an economics professor at Concordia University in Montreal. This landscape of lower home prices is likely to continue this year.
“Housing prices have been disconnected from reality for some time now,” Lander said. “The rapid increase in interest rates is probably going to generate a rather quick fall in housing prices and a sudden correction.”
Higher interest rates aim to reduce demand, discouraging Canadians from opting for larger loans such as mortgages, Lander said. This is already being reflected in some of the latest data from the Canadian Real Estate Association (CREA), said Doug Porter, chief economist at the Bank of Montreal (BMO).
“There was no significant change in the overall trend since last October,” Porter said, “sales are clearly below the 10-year average. Elevated interest rates will continue to put downward pressure on prices this year.”
The Bank of Canada has another announcement scheduled for Jan. 25. While the central bank suggested it may be ready to press pause on interest rate hikes, further increases have not been ruled out entirely.
Sales in the Greater Toronto Area have slowed down significantly in recent months, said Nero Naveendran, a real estate agent based in Toronto.
“Nobody wants to get into a market where they expect prices to continue to go down,” he said, “they are waiting on the sidelines until they know for sure that interest rates won’t go up anymore.
“If we know that the interest rates are going to stay the same, then the sales will pick up.”
Part of the article was reported by the Canadian Press.