The Canadian Real Estate Association expects home sales to decline 0.5% and prices to fall 5.9% from 2022, the last month of which was marked by a lackluster market as sellers and buyers remained on the sidelines.
CREA’s forecast targets a total of 495,858 transactions in 2023 and is based on “more or less” stable sales since the summer, “which suggests an end to the decline in sales due to the increase in interest rates and high levels of uncertainty”.
The same factors will also weigh on the average home price, which ACI predicts will hit $662,103 in 2023.
For 2024, CREA is banking on a 10.2% rise in property sales as markets continue to return to normal, while it expects the national average residential property price to increase by 3.5% from 2023 to 2024, to about 685,056 — down from 2022, but similar to 2021.
The predictions come after a turbulent year for housing in Canada. The year 2022 began with homes changing hands rapidly in hyperactive markets like Vancouver and Toronto, as interest rates remained low.
However, the spring saw interest rate hikes which gradually dampened sales as sellers decided to pull their properties off the market to wait for prices to rise again and buyers decided their mortgage payments would be too high to afford. make a purchase.
“Interest rates are just too high,” said Michelle Gilbert, a Toronto-based broker with Sage Real Estate.
“Many of the people I work with are people who have to move, so people who have to move for work […] or who need to move into a bigger house. »
December “particularly slow”
Investors have mostly disappeared, as have first-time home buyers, sending property sales plummeting. In December, transactions were down 39.1% from the same month in 2021, ACI said.
However, the association pointed out that national home sales in December 2022 were up 1.3% from those in November.
BMO Capital Markets chief economist Doug Porter said the numbers are a sign that there is little forced selling at the moment, which is helping to support prices.
However, he cautioned against forecasts that are based on just one month.
“Real estate activity tends to be quieter in December and January anyway, so it’s not wise to jump to conclusions at the turn of the year,” he wrote in a memo to investors.
“But this December has been particularly slow, both for sales and, above all, for new listings for sale. »
The last month of 2022 also marked a further depression in prices. The actual national average home price in December was 626,318, down 12% from the last month of 2021.
CREA found that December prices in Ontario and British Columbia showed markets cooled primarily due to higher borrowing costs.
Prices in Alberta, Saskatchewan and Newfoundland and Labrador held up much better, while those in Quebec and the Maritimes were somewhere in between.
A spring market in sight?
While in most markets prices have fallen after peaking in early 2022, they remain well above where they were in the summer of 2020, ACI added.
“As we look to the crucial spring selling season, the overarching question is who will come out of hibernation with more strength — buyers or sellers? Mr. Porter wondered.
“We suspect that the market will further digest the rapid rise in interest rates and that buyers will be more reluctant to reappear, which should keep prices under pressure for some time to come. »
Ms Gilbert agrees and predicts that 2023 will be the year several sellers try to end the stalemate.
“We’re going to see sellers come out of hiding because I don’t think they want to wait until the market bottoms out,” she said.
“I think it could herald a spring market. »
However, she warned that buyers would be less interested in re-entering the market unless interest rate hikes abate or the key rate begins to fall. Most economists expect the Bank of Canada to issue at least one more rate hike later this month to combat stubbornly high inflation.
“That doesn’t mean it’s dark and gloomy, but I think everyone is a bit cautious,” she said.
“If the Bank of Canada ends its tightening, I think there will be a lot more optimism […], but for now, there is nothing to be optimistic about. »