Wondering what the Canadian real estate investment trends & forecasts of 2023 are? Keep reading!
We survived 2022 – and we’re all happy to bid a not-so-fond farewell to Covid, 2022 and welcome 2023!
This report summarizes common trends in the short-term future of Canadian real estate and Canadian Real Estate Markets in 2023.These trends were sourced from; PWC’s Emerging Trends in Real Estate 2023, Canadian real estate markets to watch in 2023 and, 7 Real Estate Predictions for 2023 From RE/MAX That Canadians Need To Know About.
7 Real Estate Predictions For 2023 From RE/MAX That Canadians Need To Know About
RE/MAX identified seven residential real estate trends in 2023. The following is a summary.
1 Supply is expected to equal demand
When supply equals demand, both buyers and sellers benefit.
According to RE/MAX, 60% of housing markets in Canada — including the Greater Toronto Area (GTA), the Greater Vancouver Area (GVA), Calgary, Regina, and Winnipeg — are expected to balance out in 2023 thanks to a drop in price and easing demand.
2 National housing prices are expected to drop
The national house price is expected to decrease by 3.3%, with many notoriously pricey areas anticipated to drop by 10% or more, including the GVA, the GTA and Quebec City.
3 Atlantic Canada’s biggest cities are expected to see a price increase
In Eastern Canada, average sale prices are expected to jump in some of the area’s biggest cities, including Halifax, Nova Scotia, and St. John’s, Newfoundland and Labrador, where the average house price in 2023 is estimated to be $586,076 and $350,805, respectively.
Despite housing price increases, Atlantic Canada still remains one of the most affordable areas in the country to buy a home.
4 Condos are expected to remain strong in 2023
A return to the office and the end of the pandemic-driven urban exodus means more people are moving back to the city.
The condo market in Canada’s biggest cities is likely to be busier than usual, especially in places like the GVA, and Edmonton, where demand for downtown condos is expected to rise.
5 Most Canadians believe affordable housing will increase in 2023
RE/MAX reports that 54% of Canadians believe that the two-year ban on foreign investors purchasing property will increase the availability of affordable housing for Canadian homebuyers.
As of January 1, 2023, non-Canadians (anyone not a Canadian citizen, permanent resident or person registered under the Indian Act) will not be able to purchase property in Canada for two years, with some exceptions. The goal of this law is to help regulate the high prices in Canada’s housing market.
6 The trend of moving out of province isn’t going anywhere
15% of Canadians are considering moving to another province in 2023 in search of better housing affordability and livability, non-homeowners are twice as likely to relocate.
According to RE/MAX’s 2023 Canadian Housing Market Outlook Report, Nanaimo, Kelowna, Saskatoon, and Winnipeg in the west; and Hamilton-Burlington, Brampton, Mississauga, and Niagara in the east are all considered buyer’s markets in 2023.
7 The majority of Canadians still say home ownership is the best long-term investment
According to RE/MAX, 73% of Canadians think homeownership is one of the best long-term investments they can make. Yet, 67% say they’re less inclined to buy in the first half of 2023, and 62% are less inclined to sell in that time frame. Buyers and sellers sit on the fence, waiting for interest rates to stabilize.
Top Real Estate Trends for 2023
PwC identified three Top Real Estate Trends for 2023; below is a summary.
PwC’s predictions for best bets for the Canadian real estate industry in 2023 remain similar to their predictions in 2022.
- Top Real Estate Trends for 2023 Investors sit on sidelines and wait for valuation to settle. The Interest rate increases by the BOC created reduced competition for deals, and supply chain shortages, and delays have increased costs for labour and materials. Because of the interest increase and supply chain shortages, players are wait on the sidelines to see where/when the market valuations settle.
- Companies with a strong track record of environmental, social and governance performance (ESG) will have an advantage.Climate disclosure standards from the IFRS Foundation’s International Sustainability Standards Board sets out detailed requirements for industry and real estate sectors which affect publicly owned and private real estate companies in Canada. Companies with a strong track record of ESG performance will have the advantage in attracting capita
- Higher interest rates keep potential home buyers in the rental market. To reduce costs and speed up new construction, Government needs to eliminate actions that hinder affordability and Canadian real estate companies need to continue working on incorporating technology innovations and process changes to reduce costs and speed up processes.
Industrial real estate – warehousing, fulfillment, data centres, and self-storage rank high in their annual survey of industry players.
Multifamily residential housing – rising immigration activity, and the current environment which favours investing multifamily instead of developing it.
Life Sciences– health-related users was a favourite among survey respondents.
10 Canadian Real Estate Markets to Watch in 2023
PwC identified 10 Canadian Real Estate Markets to Watch in 2023. The following is a rundown.
- The Vancouver real estate market leads as the highest among major Canadian cities for both its investment and development prospects. The Conference Board of Canada (CBC) predicts healthy economic growth of 3.3% in 2023.
- Rental demand is strong, and we’re not expected to see either increases in vacancy rates or decreases in rent. Among the opportunities for the real estate industry are developments along the Broadway subway project.
- According to Colliers, the industrial vacancy rate of 0.1% is the lowest in the country, which reported a 22.5% year-over-year rise in the asking net rent and developable industrial land continues to shrink.
- The office market is seeing declining vacancy and climbing rents with new developments in the works. Return to work and the technology section have impacted the downtown vacancy rate which dropped to 7.2% in the second quarter of 2022, down from 7.7% at the start of the year.
- Toronto real estate expects continued economic growth. According to the CBoC’s spring 2022 major city insights report, gross domestic product will rise by 3.5% in 2023.
- The short-term outlook for some areas of the Toronto real estate market is mixed; total housing starts will fall in 2023 before rising in 2024, CMHC predicted in its spring 2022 housing market outlook. Adding to the challenges are plans by the City of Toronto to raise residential development charges by 46% by 2024.
- Office occupancy is still below pre-pandemic levels. The outlook for industrial assets remains strong.
- At 2.7%, the CBoC predicts modest economic growth for Montreal in 2023. Strengths are the city’s attractiveness for investment activity and a very low unemployment rate.
- The rental housing market is enjoying low vacancy and healthy rental rates. Condos are also attractive, and many projects are moving forward despite rising interest rates and other industry challenges. Opportunities are opening up around transit-oriented development, including those related to the ongoing development of the Réseau express métropolitain network.
- In the office market, many large tenants are still considering whether to downsize or sublease space.
- According to Colliers, the industrial market is extremely tight with a vacancy rate of 0.6% during the first two quarters of 2022. Asking net rents rose by a whopping 64% on a year-over-year basis, Colliers reported.
- Calgary is a key market to watch, rising to No. 4 from No. 8 in 2022 since Calgary is seeing stronger oil prices and higher levels of investment in the local technology and film sectors. The CBoC is predicting strong economic growth of 4.7% in 2023.
- The city has a strong outlook for residential activity, with its economic recovery, job growth, relative affordability and rising recognition as a desirable place to live making it attractive for many looking ahead to 2023.
- Calgary’s office market continues to be challenging, with too much supply and insufficient demand.
- According to Colliers, the industrial market is seeing high levels of activity, with the vacancy rate falling to just 2.4% in the second quarter of 2022, and still has affordable land available on the city’s periphery.
- The economic outlook for Edmonton expects to reach 5.6% in 2022, followed by another healthy rise of 4.2% next year, mainly because Edmonton remains affordable and has more opportunities to build affordable housing, where the structure of the programs is less of a challenge.
- The municipal government seeks to increase density by encouraging the development of mixed-use communities. As a result, it’s considering taxing low-density properties at a higher rate than multiunit buildings.
- The office market remains sluggish, and the industrial market is strong.
- Ottawa continues to thrive alongside Canada’s top markets, fueled by building activity across the city from the ongoing expansion of light-rail transit in Ottawa, prompting developers to pursue multifamily and mixed-use development opportunities close to transit stations.
- The federal government continues to be a major office tenant and encourages short-term leases and is leaving it up to individual departments to decide where to work. This causes uncertainty in the office market.
- Ottawa’s industrial market continues to see strong demand, with a vacancy rate of just 1.1%, Colliers noted in its report for the second quarter of 2022. The asking net rent was up 13.3% on a year-over-year basis.
- The CBoC is expecting economic growth of 2.6% for Halifax in 2023 and the city is benefiting from interprovincial migration within the last two years – more than 10 times the annual average of the previous decade.
- The rental market is very tight, and is hindered by temporary provincial rent control measures which create challenges by discouraging tenant turnover. Multi-residential housing construction is a significant source of building activity, but more supply is needed to address affordability challenges.
- Downtown Class A office vacancy rates are high, sitting at 26.2%, according to CBRE.
- The Halifax industrial market continues to grow, with Colliers reporting a record-low vacancy rate of just 1.8% in the second quarter of 2022. The strength of the industrial market extends to other areas of the Atlantic region, which could see a further boost from liquified natural gas terminal projects.
- Quebec City’s economy will grow at a solid pace in the near term, rising by 3.4% and 3%, respectively, in 2023, according to the CBoC.
- A key source of activity in the residential market is rental construction, which in 2021 helped housing starts reach their highest level in 30 years, CMHC noted in its spring 2022 housing market outlook. Still, CMHC expects demand to exceed supply.
- An ongoing issue to watch is Quebec City’s tramway project which is expected to move forward in 2023.
- In the office market, tenants are signing short-term lease renewals amid uncertainty over return-to-office strategies. On the industrial side, there’s a lot of appetite for space but a limited amount of land available.
- The CBoC is projecting a solid outlook for Winnipeg, with economic growth of 3.5% next year.
- On the residential side, home prices have risen just as in other cities, but Winnipeg remains an affordable city.
- CBRE reported a downtown Class A vacancy rate of 14.5%.
- On the industrial side, rents are rising, and construction activity remains strong, according to Colliers. The industrial vacancy rate was just 2.3% in the second quarter of 2022, Colliers found.
- Economic growth in Saskatoon is strong as the world’s need for commodities like potash boosts local prospects. The CBoC is projecting growth of 5.3% this year, followed by 4.1% in 2023.
- After a projected decline in 2022, the CBoC expects housing starts to rise next year. Although Saskatoon remains affordable compared to many other parts of Canada, CMHC expects more demand for more affordable housing types, such as townhouses and condos.
- The overall office vacancy rate is expected to fall in 2022 to 19.1% from 19.4% last year, according to CBRE. And on the industrial side, Saskatoon’s market is seeing an uptick in leasing activity, which helped lower the city’s vacancy rate to 2.1% in the second quarter, according to Colliers.
Covid created both opportunities and challenges in Canadian real estate, technology, and every other area of our personal lives. The pandemic disrupted and reshaped our work, home lives, and economic landscape.
How has 2023 treated you so far are you feeling positive or negative? Where do you want to go with your real estate business in 2023?
I’d love to hear how [email protected].
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