Predictions for the Ontario real housing market in 2023
In the past year, the price of purchasing a home in Ontario has fallen from its lofty highs, and the question for 2023 is whether or not this trend will continue. There was a peak of $1.08 million in March of 2022 for the benchmark price of a home in Ontario, as calculated by the Canadian Real Estate Association (CREA), which includes the sale prices of condominiums, attached and detached houses across all markets in the province.
From the beginning of the COVID-19 pandemic, that was a staggering 64% increase in just two years. Since then, prices in Ontario as measured by CREA's benchmark figure have dropped by nearly 20%, but even this precipitous drop only brings prices back to where they were in September of 2021.
When will housing prices in this state finally bottom out? When will the real estate market begin to recover, given that the monthly rate of home sales is now lower than it has been per person since the mid-1990s?
This forecast of the Ontario housing market for 2023 was compiled by CBC News after the network surveyed real estate professionals and analyzed published forecasts.
Real estate experts predict that housing prices will continue to drop, though not by as much as they have so far.
According to TD Economics' Rishi Sondhi, prices in Ontario will fall through the first half of 2023 before stabilizing in the second.
Condominium construction might be scrapped.
According to Desjardins' senior director of Canadian economics Randall Bartlett, it's anyone's guess as to when falling Ontario home prices will stop. This is because of competing forces in the housing supply and demand.
The biggest factor that has dampened demand has been the higher interest rates. As a counterpoint, Bartlett notes that both employment and immigration levels are forecast to rise, which should increase the demand for housing.
On the supply side, investors may be forced to sell because of the higher carrying costs brought on by the current interest rate environment, while many property owners are hesitant to list their properties in light of the recent price declines.
It appears that the rate of new home construction, which had been rising rapidly, is beginning to level off. The Canada Mortgage and Housing Corporation (CMHC) has recently issued a warning that the recent sharp decline in condo pre-construction sales, increased building costs, and increased interest rates "could guide to project cancellations or slowdowns in project launches" in the Greater Toronto Area.
"We're in a very different environment," Bartlett remarked. Interest rates are higher, prices are lower, and demand has decreased.
He speculates that this may affect the number of newly constructed homes that become available in the second half of 2023.
Meridian real estate expert Mark Ostland believes that if the Bank of Canada is finished raising rates, it will boost confidence among potential buyers.
We anticipate a continued low number of listings.
"We are in what I call even-steven times," Ostland said in an interview.
"First, housing costs are lower than they have been in recent years. But on the other hand, rising interest rates are making it harder for buyers to get the mortgages they need."
Both the number of listings and the number of sales in Ontario are expected to remain low for the foreseeable future, according to real estate experts.
In the current market, "people really don't want to list their homes when sales and prices are falling, for obvious reasons," said Sondhi, who added that this factor was "sort of winning out" and keeping supply relatively subdued.
Except for the lockdown-affected period in the spring of 2020, home sales in the Greater Toronto Area have hit record lows every month since June.
"Still a major obstacle for buyers is the drastic increase in interest rates and the consequential drop in affordability. We expect them to maintain market stability for the foreseeable future "according to Robert Hogue, RBC economist and author of December's report on the housing market.
In terms of price, Hogue pointed out that prices in the Toronto area are down 18% from their peaks and predicted that "any further depreciation is likely to be more incremental."
Metro Toronto versus the Rest of Ontario
ReMax, one of the largest real estate companies in Canada, predicts that prices in the Greater Toronto Area will fall to their 2021 levels, which is about an 11% decrease from the average this year.
What will happen to housing markets in other parts of Ontario that have seen equally astounding price increases over the past two years is a topic of debate.
Bartlett stated, "From our perspective, markets outside the GTA have further to fall than those in the GTA."
One reason why smaller Ontario cities are still more at risk of price declines in 2023 is that they have a higher ratio of single-family homes to condominiums than the Greater Toronto Area. Condominium prices have been relatively stable compared to house prices.
According to ReMax's 2023 real estate outlook, average prices will fall by up to 15 percent in London, Kitchener-Waterloo, Barrie, and the Georgian Bay area, while rising by 2 to 8 percent in the rest of the province.
The Canadian Mortgage and Housing Corporation (CMHC) predicts that national average sale prices will continue to fall until the second quarter of 2023.
The promise of Ontario Premier Doug Ford to clear the way for the construction of 1.5 million new homes in the province over the next decade will be put to the test in the coming year.
Recent actions by the Ford government to restrict municipal development fee charging, dilute the authority of conservation authorities, and make portions of the Greenbelt available for housing have been justified by the housing of available dwellings.