(Toronto) After the price escalation of the past few years in the real estate market, buyers are hoping that luck will be in their favor in 2023.
Luck may have already turned: prices have fallen since last spring, overbidding is less frequent and economists predict the end of increases in the Bank of Canada’s key rate.
These successive increases have increased the mortgage bill by several hundred dollars, if not several thousand dollars.
“It takes time,” says Despina Zanganas, a Toronto broker.
She expects that people who have been putting off their purchase will be more comfortable this year, now that they have better assimilated the new reality of the real estate market.
“You get used to it,” says M.me Zanganas. People say they no longer have to engage in a one-upmanship war and submit unconditional offers. They can now present conditional offers, which gives many people greater confidence. »
Another major change may appear on the horizon. Economists have predicted a recession in 2023, although it is still too early to judge the severity.
BMO Capital Markets Senior Economist Douglas Porter estimates the chance of the Canadian economy avoiding a recession at 25% to 30%. The odds of the economy slowing down a bit are 50% and the odds of a major recession are 20% to 25%.
“This will have an influence on the real estate market,” he says. The less the economy is disrupted, the better the real estate market will behave. »
Even today, he says, the real estate market is one of the weak spots in the economy, a phenomenon not seen in years, if not decades.
According to him, when this economic cycle is over, house prices will have fallen by 20% to 25%. Already, these have already fallen by almost 10%.
The Canadian Real Estate Association indicated last month that the average price of a residence in November amounted to $632,802, a drop of 12% compared to the same month the previous year.
However, the decline in prices was offset by the rapid rise in the Bank of Canada’s key rate, which currently stands at 4.25%, its highest level since January 2008.
“For me, interest rates are the main story of the past year. They will be the biggest factor affecting the economy, by far, says Porter. The reaction is the price correction that we are witnessing which has not compensated for the rise in interest rates. I believe the market is still trying to digest this increase. This is not yet reflected in prices. »
According to the Association professionnelle des courtiers immobiliers du Québec, the average price of a single-family home was $510,000 in the Montreal metropolitan area, down 3% from the same month a year earlier. However, the median price was up 3% in the Quebec City metropolitan area.
The drop is more significant in the Greater Toronto Area where the median price was 1.05 million, a drop of 9.2%.
Porter agrees that the unpredictable nature of the COVID-19 pandemic makes it difficult to predict how the real estate market will perform.
“The real estate market is holding up better than expected simply because we are in an unusual cycle. No economist can have much confidence in their forecasts these days because of the many unique aspects of the economy today. »