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Canada’s Housing Market Predictions for 2023

Canadians are anxious over Canada’s housing market predictions for 2023. Both buyers and sellers are sitting on the sidelines waiting for the interest rates to stabilize.

Interest Rates

The Bank of Canada began aggressively raising interest in March of 2022, and interest rates currently sit at 4.25%.

Gone are the days of 2017’s record low .50% interest rates. Buyers and sellers have been anxiously waiting on the sidelines to see when The Bank of Canada’s interest rates will stabilize.

The Bank of Canada’s raised interest rates caused home prices in many major markets across Canada to decrease. But not by much.

According to Phil Soper, president, and CEO, Royal LePage “After nearly two years of record price appreciation, fueled by a steep climb in household savings, very low borrowing costs and an overwhelming desire for more space during the COVID-19 pandemic, the frenzied housing market overshot and the inevitable downward slide or market correction began, intensified by rapidly rising borrowing rates,”. “In an era characterized by the unusual, this correction has not followed historical patterns. While the volume of homes trading hands has dropped steeply, home prices have held on, with relatively modest declines. We see this as a continuing trend.”

Quarterly Housing Price Predictions

Re/Max’s 2023 housing market outlook predicts Canadian home prices to drop an average of 3.3% from 2022. The Royal LePage Market Survey Forecast, predicted an even lower decrease of 1.0% in 2023.

Despite the uncertainty, housing market predictions show prices nationally are still on the rise, however, modestly.

·        First quarter predictions

  • 12.2% lower compared to Q1 in 2022, a 2.4% decline on a quarterly basis

·        Second quarter predictions

  • 7.5% lower than 2022, remaining flat on a quarterly basis

·        Third Quarter

  • 2.0% lower than 2022 , a 0.7% increase on a quarterly basis

·        Fourth Quarter

  • 1.0% lower than 2022, a 0.08 % increase on a quarterly basis

Summary of Average Canadian Housing Prices By Area

With increased interest rates, predictably, housing prices fell in most Canadian cities, with the exception of Halifax and Calgary.

Chart from 2023 Housing Market Predictions in Canada: What to Expect | Zolo

The pandemic created low unemployment, higher wages, low default rates, and buyers upsizing to larger homes in suburbia that afford a higher lifestyle. Without an increase in housing supply, homeowners may be reluctant to sell properties if higher-end properties can’t replace them.

Historically, home prices rise faster than incomes, and once the interest rates stabilize, buyers may be willing to get back into the market.

Although home prices have dipped form the record highs of 2022, they remain above pre-pandemic levels and housing market predictions expect them to remain at the 10-year Canadian average.

Canada’s Housing Shortage

Currently, Canada is facing a housing shortage because of:

  • The Government of Canada is set to bring in 500,000 new immigrants which puts pressure on governments to build more housing and more affordable housing.
  • The demand of millennials with smaller households who require more housing units per capita.

These circumstances beg the question – will the market crash again as it did in 2008? The short answer is no, there is currently too much demand for the market to crash.

According to Housing Market Predictions for 2023 | Woolcott Real Estate “ Already, there are policies in place to help make housing more available and affordable. The federal Housing Accelerator Fund aims to create 100,000 new homes over the next five years. And according to the Canadian Mortgage and Housing Corporation, Canada will have 19 million new housing units by 2030 if construction continues at the same pace.”

“Provincially, plans are in place to cut development costs and allow current property owners to build up to three residential units on a single lot.”

Regardless of the housing market predictions, it’s interesting to look back once the year has passed to see whether the experts could predict the 2023 Canadian housing market outcomes. Although history repeats itself, historically, the market is unpredictable. Their guess is as good as yours.

Did you have real estate predictions that materialized?  I’d love to hear about it, email me [email protected]

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