The residential property market in major Canadian cities has reached a “turning point” and is now headed for price declines, warns financial analyst firm Moody’s Analytics in its real estate outlook update.
Posted at 4:46 p.m.
And it is in the Montreal region that this decline in residential property prices could be the most significant among the main urban centers in Canada.
According to Moody’s Analytics, this decline could be around 4.6% in annualized decline at the end of 2022. It could reach 7.5% in annualized decline in prices at the end of 2023.
Home prices in Montreal have shown greater sensitivity to overvaluation in historical data since 2005. As a result, they are likely to come under downward pressure compared to Toronto or Vancouver.
Excerpt from Moody’s Analytics report, which The Press obtained
“With the rise in rates and the significant deterioration in housing affordability, the residential real estate market in Canada has reached a turning point,” reads the report prepared with the Toronto firm Real Property Solutions (RPS), a subsidiary of the conglomerate Brookfield Asset Management.
“Given that Canadians’ high indebtedness makes them relatively more sensitive to changes in interest rates, we expect home price appreciation, which has been strong for the past two years, to slow significantly over the next few years. mortgage interest rate hikes,” says Moody’s Analytics.
“We expect a brief, mild decline in domestic house prices in 2023, after which house price growth will resume, albeit at a significantly slower pace. »
A slight decline
Thus, at the Canadian level, Moody’s Analytics anticipates that the rise in residential property prices will slow to 1.5% at an annualized rate by the end of 2022, before slipping into a slight decline of around 0.6 % towards the end of 2023.
But among the most populous provinces, it is in Quebec that the decline in residential real estate prices could prove to be the most significant: around 3% at the end of 2022 and around 6% at the end of the year 2023.
In comparison, in Ontario, Moody’s Analytics anticipates a slowdown in the rise in residential property prices to around 2% at the end of 2022 – against 17% observed at the end of 2021 – which would be followed by a decline of around 0.7% at an annualized rate towards the end of 2023.
Among the main urbanized regions in Quebec, in addition to the decline of around 4.6% in 2022 and 7% in 2023 that is anticipated in the Montreal region, only the Gatineau-Ottawa region could experience a comparable decline: around 3.5% at the end of 2022 and throughout 2023.
In the Quebec region, Moody’s Analytics anticipates a slowdown in the annualized increase in residential property prices to around 2.7% at the end of 2022 – an increase halved compared to the end of 2021 – and to only 1% towards the end of 2023.
Canada Mortgage and Housing Corporation
By lighting yellow lights in the residential real estate market in Canada, the update of the market outlook by Moody’s Analytics accentuates the scope of those published Thursday by the Canada Mortgage and Housing Corporation (CMHC).
In its Housing Market Outlook report, CMHC expects price growth to moderate to near historical averages by late 2023 or early 2024.
But this growth will remain positive and the prices of residential properties will remain high, anticipates the CMHC.
Therefore, combined with rising interest rates, continued high prices will continue to hurt Canadians’ financial ability to afford home ownership.
With The Canadian Press