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How will be the Real Estate Market in Canada in 2023?

Real Estate Market in Canada in 2023
Real Estate Market in Canada in 2023

Canadian real estate firms have enjoyed the good and sustained performance, as they move beyond 2023, yet, their outlook has substantially shifted. Many of the Canadian real estate firms we spoke with and surveyed in the summer of 2022 foresee a stop in market activity as they wait to see how the current uncertainty plays out. This is due to the convergence of financial, environmental, and social factors. Although some people have been surprised by the shifting environment in 2022, the Canadian real estate sector has a bright future. In order to produce sustainable growth and outcomes in 2023 and beyond, it will take a combination of patience, agility, and a willingness to take risky decisions. Let us go through the Real Estate Market in Canada in 2023!

Real Estate Market in Canada in 2023: Forecast Overview

Home values in many of Canada’s major markets have been falling ever since the Bank of Canada started aggressively hiking interest rates in March of this year. However, the rate of reduction has remained moderate. The median price of a single-family detached property and condominium is anticipated to decrease by 2.0% and increase by 1% to $781,256 and $568,933, respectively, according to the Market Survey Forecast from leading Canadian Housing agencies. The aggregate1 price of a home in Canada is predicted to decrease 1.0% year-over-year to $765,171 in the fourth quarter of 2023.

Higher borrowing costs reduce affordability, which historically has driven consumers out of the market, reduced demand, and led to a decline in housing prices. On the other hand, a number of variables are now supporting housing values.

If there are more houses for sale than there are buyers, prices will correspondingly decline. Canada is experiencing a severe, protracted scarcity of housing supply. The enormous millennial population’s current lifespan plus a record number of newly arrived immigrants who need housing promote organic demand. More housing units are required per capita than in the past due to smaller household sizes. Buyers who have the opportunity to buy but have decided not to do so during these unsettling times are creating more pent-up demand.

Few families are expected to need to sell their homes in order to make ends meet because of low unemployment and a sizable pool of open positions. Household savings are still above long-term averages, making it simpler to get over down payment obstacles. Homes are marginally more affordable today than they were at the peak of the previous boom, partially offsetting the effect of rising rates.

Pricing Forecast of the Real Estate Market in Canada in 2023

The third and fourth quarters of 2023 are likely to see minor quarterly increases in home prices across the country, but year-round values are anticipated to stay below those of the corresponding periods in 2022. In Canada, the average price of a home is anticipated to fall 12.0% in Q1 2023 compared to the same quarter in 2022, following a 2.4% drop over the fourth quarter of 2022. The national aggregate price is anticipated to be 7.5% lower year over year and practically unchanged on a quarterly basis in the second quarter of 2019.

Homes are predicted to have decreased by 2.0% year over year in the third quarter, reflecting a quarterly increase of 0.70%. And in the fourth quarter of 2023, an increase of 0.8% quarter-over-quarter is anticipated in the national aggregate price of a home, which is predicted to complete the year 1.0% lower than the same quarter in 2022.

It is anticipated that the recovery won’t be divided equally. It is anticipated that regional markets that experienced more moderate price growth during the recent real estate boom will see more moderate reductions. Cities like Calgary, Edmonton, and Halifax are anticipated to experience modest price growth in 2023 as a result of their relative affordability, as they continue to draw out-of-province buyers, particularly first-time homebuyers from southern Ontario and British Columbia seeking more affordable housing.

Even though they are down from the record highs reached in the first half of this year, property prices are still substantially higher than they were before the pandemic. In Canada, the predicted average price of a home in the fourth quarter of 2023 is anticipated to be 15.0% more than in the fourth quarter of 2020 and 18.4% higher than in the fourth quarter of 2019.

2023 will be a Period of Price Discovery Amid Major Shifts

Prior to the Bank of Canada’s series of interest rate rises, Canadian real estate developers worried that having too much cash would raise competition for deals and drive up asset prices. Today, however, the opposite is true.

According to surveys and reports, lenders have tightened their borrowing criteria, which, combined with increasing financing costs has made it more difficult for real estate enterprises to raise money and advance projects. Therefore, there may be a fall in the number of realtors and investors in the real estate market in Canada in 2023. 

As a result, there is less competition for deals in a time of price discovery, when some real estate assets are under pressure and sellers and purchasers are in conflict over pricing expectations and valuations. Many players are delaying their moves for the time being due to the increased level of uncertainty as they wait to see how the market develops, particularly with regard to pricing and valuations.

Real Estate Market in Canada in 2023: Area-wise Summary

Greater Toronto Area

In the Greater Toronto Area, the total cost of a home is anticipated to drop by 2.0% annually to $1,056,734 in the fourth quarter of 2023. The median price of a single-family detached home is expected to fall by 2.5% to $1,329,413 during the same time period, while the median price of a condominium is expected to rise tepidly by 1.0% to $701,243.

Since interest rates started to rise earlier this year, Toronto and its environs have experienced among the nation’s sharpest price reductions. However, the cost of a home continues to be out of reach for many prospective purchasers, placing significant additional pressure on the rental market, where prices have recently increased.

The majority of the GTA price correction has already taken place, and more typical trends are about to resume.

Southern Ontario is still facing significant supply issues. When they re-enter the buying cycle, buyers who have been waiting for prices to level down may expect to face more competition, especially in the more cheap condo market, though not at the levels witnessed in 2021 and early 2022. The same may not be prevalent in the real estate market in Canada in 2023.

Due to a lack of workers and rising construction material prices, development has halted. In order to meet the demand and an expanding number of newcomers, inventories will need to be significantly increased in the upcoming years.

Greater Montreal Area

The average cost of a home in the Greater Montreal Area may drop to $532,238 in the fourth quarter of 2023, a 2.0% year-over-year decline. The median price of a single-family detached home may fall by 2.5% to $588,315 during the same time frame. Whereas, the median price of a condominium can fall by 1.5% to $421,383.

Prices in Greater Montreal should continue to decline in 2023 as a result of rising borrowing rates, rising prices for basic products, and more recently, rising municipal taxes. The price correction is done largely. Yet, we still expect prices to decline somewhat in the first half of the year before moderately rising over the next six months once interest rates have stabilized. Many purchasers taking a wait-and-see approach may return to the market at that moment.

Families in Montreal will keep looking for solutions as they wait for the economy to get better. Their lowered spending and discretionary income. The household savings rate, which has remained surprisingly higher than it was prior to the pandemic, is anticipated to decline as Canadians are squeezed by inflation. As a result, given their relative affordability, buyers will consider condominiums as an option.

Due to the relative affordability of the real estate market, the Greater Montreal Area is still anticipated to draw buyers from other Canadian provinces, just as it did in 2022. On the other hand, the two-year restriction on foreign purchases, scheduled to take effect on January 1st, has already started to affect the market. Although there was a small uptick in foreign buyers when the news was made, as the year approaches an end, interest from foreign buyers has drastically decreased.

Greater Vancouver

In Greater Vancouver, the total cost of a home is anticipated to drop to $1,216,611 in the fourth quarter of 2023, a 1.0% year-over-year decline. In the same time frame, it is anticipated that the median price of a single-family detached home would decrease by 2.0% to $1,644,538, while the median price of a condominium will rise by 1.0% to $747,299.

Although many buyers are still holding out, Greater Vancouver’s activity levels are beginning to resemble seasonal averages. Attractive homes in popular neighborhoods continue to sell rapidly when they are priced well. Given that supply is still much below what is necessary for the market to be deemed balanced, I anticipate that prices will start to stabilize in the spring and summer as some stalled purchasers enter the market.

The paucity of supplies is a vicious cycle. If they can’t locate another property to buy, sellers won’t advertise their house. Despite weaker demand in the second half of this year, prices in the area have not dropped any lower due to a scarcity of inventory. And if business picks up in the coming year as anticipated, it won’t be long before purchasers are faced with stiff competition once more.

Ottawa

The average cost of a home in Ottawa is anticipated to rise 2.0% over the previous year to $739,602 in the fourth quarter of 2023. The median price of a single-family detached home is expected to increase by 1% to $850,117 during the same time period, while the median price of a condominium is anticipated to rise by 2% to $378,114.

Since rising financing costs will continue to restrict consumers’ purchasing power and force them to the lower end of the market, condominiums are projected to experience greater price growth than other property types, including single-family detached homes. 

In 2023, interest rates will still have a big impact on property values. We might observe an increase in property prices and a rebound of buyer desire from people who have been waiting on the sidelines if interest rates stop rising, or even decrease next year.

Sales would rise gradually though, as it is unlikely that dwindling inventories would be replaced quickly enough to meet resurgent consumer demand.

Calgary

In Calgary, the total cost of a home is anticipated to rise to $612,451 in the fourth quarter of 2023, an increase of 1.5% over the previous year. The median price of a single-family detached home is anticipated to climb by 1% to $701,142 during the same time period, while the median price of a condominium is anticipated to rise by 2.5% to $239,543.

It’s doubtful that Calgary’s real estate market will experience price decreases in 2023. The Calgary market has seen less dramatic fluctuations than Canada’s big urban areas, which suffered fast falls over the last six months after experiencing steep spikes during the epidemic boom.

Out-of-province buyers continue to be in demand in Calgary, especially first-time buyers from Ontario looking for cheap housing options in a big city environment. Condominiums are very popular among investors from outside of the province. Prices are still under pressure to rise, especially in the lower end of the market, due to a scarcity of available inventory, particularly in the single-family detached segment.

The demand from buyers has been steady, and I predict the real estate market in Calgary will continue to have a steady pace of activity. Many customers are waiting impatiently for the ideal product to become available.

Edmonton

In Edmonton, the total cost of a home is anticipated to climb by 1.0% year to $442,683 in the fourth quarter of 2023. The median price of a single-family detached home is expected to increase by 2.0% to $491,436 during the same time period, while the median price of a condominium is anticipated to decline by 1.5% to $198,281.

As compared to pre-pandemic levels, Edmonton’s housing market continues to endure a shortage of inventory, which supports stable home prices and a balanced market overall. It is expected that sales activity will be essentially flat in 2023 as budgets for home purchases continue to contract as a result of increased living expenses and higher interest rates on loans. As a result, we predict that prices will increase at a nearly level rate by the end of the year, with the majority of this gain taking place in the highly sought-after single-family detached segment.

The Edmonton market will remain stable and healthy through the spring due to persistently strong interprovincial demand. Next year, I anticipate a return to the regular seasonal patterns, with increasing activity in the summer and a modest decline into the fall.

Winnipeg

In Winnipeg, the total cost of a home is anticipated to drop to $368,181 in the fourth quarter of 2023, a 1.0% year-over-year decline. The median price of a single-family detached home is expected to increase by 1% to $410,565, while the median price of a condominium is anticipated to drop by 3.0% to $243,082.

Recent housing market behavior in Winnipeg has been more consistent with pre-pandemic norms, indicating that the market should revert to seasonal patterns in 2023. In the upcoming months, I anticipate regular winter activity levels, followed by a pickup in momentum as spring approaches.

The majority of market activity will continue to be driven by demand for single-family homes. Although the majority of purchasers still prefer detached homes, condo prices are not anticipated to drop considerably because inventory levels are significantly below the five-year average. Overall, I think the market is headed toward being healthier and more balanced next year, assuming interest rates quickly stabilize.

Bottomline & FAQs

This was the Forecast of the Real Estate Market in Canada in 2023. Unlikely, as in 2022, in 2023, the market seems to be smooth for buyers, provided, there aren’t any off-the-track announcements from CREA or Bank of Canada. Keep visiting our Canadian Real Estate Page to get regular updates on housing and property topics of your interest.

Even after reading through the forecast, there may be some doubts and ambiguities before you purchase your home in Canada. For that, let us answer some of the basic and frequently asked questions that may haunt your thought.

Q1: Will house prices go down in Canada in 2023?

In comparison to the same quarter in 2022, the aggregate home price in Canada is predicted to decline by 12% in the first quarter of 2023. The third and fourth quarters of 2023 are expected to show modest quarterly increases in home prices. Keep going through our monthly analysis of the Real Estate Market in Canada which will help you make a wise decision in the process.

Q2: What will be the Housing Mortgage Interest Rates in Canada in 2023?

To combat inflation that is significantly higher than its target, the bank increased rates at a record-breaking pace of 400 basis points in just nine months. The policy rate is anticipated by the money markets to peak at 4.36% in June and end 2023 at roughly 4.10%. Go through our Canadian Housing Mortgage Articles for the recent updates on the same.   

Q3: Will it be a good time to buy a house in Canada in 2023?

In an effort to curb soaring inflation, the Bank of Canada hiked its policy interest rate in 2022, which led to a decline in home sales and prices. As a result, the once scorching Canadian property market is finally cooling, although with higher borrowing costs for potential purchasers.

If you’re a prospective first-time home buyer believing the new year will be the moment to leap into the market, 2023 may be the time to make your dream a reality. However, keep on checking our Canadian Housing Market updates to figure out the industry ambiance.

Q4: Will 2023 be a good time to sell my house in Canada?

The majority of homeowners will benefit from selling now rather than in 2023. The real estate market in Canada in 2023 is going to be beneficial for sellers. This is especially true if you reside in a market that experienced a recent period of significant appreciation. Your real estate agent can explain pricing patterns in your community as well as the supply and demand for properties. In places where prices are anticipated to remain constant or increase, waiting until spring might not be a terrible idea. But if you can hold out until 2025, you might get even better results. Visit our Canadian Realtor Tips section frequently to update yourself.

Q5:Is there any new Announcement for First-time home buyers in Canada in 2023?

Next year, potential homebuyers could or might not be seeking cheaper prices, but they will have a new tax break to assist them to achieve that. According to a draught plan posted on the website of the Canadian government, the Tax-Free First Home Savings Account (FHSA) is expected to go into effect “sometime in 2023,” with the tax deduction starting to apply for the 2023 tax year. Read through the First-time Home Buyer Tips in Canada published by us regularly to get the updates.

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Written by Samit Banerjee

With an engineering and management academic background, Samit is always in the pursuit of doing something creative. In his professional career since 2008, he worked with many leading brands and also was an integral part of various government projects and initiatives. Samit’s affection towards creativity and playing with words was unable to refrain his inclination towards copywriting and public relations. With more than a decade of experience in the domain, he loves to serve his readers with interesting columns on Real Estate, Success Stories and Motivational thoughts.

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