It is no secret that the Canadian real estate market has been shifting over the last year. Home prices have tumbled, and sales activity has fallen. The Bank of Canada (BoC) has been raising interest rates since March 2022 to return the annual inflation rate to its two-per-cent target rate. In the process, this tightening campaign has increased mortgage rates and cooled off Canada’s red-hot housing sector.
But with the central bank still expected to pull the trigger on rate hikes for the next few months to ensure inflation has been defeated, what does this mean for the Canadian real estate market, especially with the typically busy spring buying season?
It could be a terrific opportunity for homebuyers, especially with prices forecast to slide further in 2023.
Is Balance Coming to the Canadian Real Estate Market?
According to the RE/MAX Canadian Real Estate Outlook for 2023, the national average price is anticipated to decrease by 3.3 per cent this year, and sales are projected to rise by 34 per cent in the housing markets analyzed.
“Amid rising interest rates and a looming recession, RE/MAX Canada is anticipating a modest decline of 3.3 per cent in average residential sales prices across the country in 2023. The estimates are based on surveys of RE/MAX brokers and agents from coast to coast,” the report stated. “In sharp contrast to 2022, most regions analyzed in the report will experience more balanced conditions in 2023 – a trend that’s already starting to materialize as a result of current economic conditions.”
The authors noted that the most significant price declines will be in Ontario and Western Canada, “where some markets may see average residential sale prices decrease by 10 to 15 per cent.”
Here is a breakdown of where prices could be headed this year for major urban centres:
- Greater Vancouver Area, British Columbia: -5 per cent
- Calgary, Alberta: +7 per cent
- Edmonton, Alberta: +3 per cent
- Saskatoon, Saskatchewan: +3 per cent
- Winnipeg, Manitoba: -8.5 per cent
- Greater Toronto Area, Ontario: -11.8 per cent
- Ottawa, Ontario: +4 per cent
- Halifax, Nova Scotia: +8 per cent
- St. John’s, Newfoundland and Labrador: +4 per cent
Overall, more than half (55 per cent) of Canadian regions are likely to transition to balanced or buyer’s markets in the upcoming year.
“It’s good see the majority of markets moving toward more balanced conditions, which is typically defined by 45 to 90 days on market. This is a much-needed adjustment from the unsustainable price increases and demand we saw early in 2022,” said Christopher Alexander, the President of RE/MAX Canada, in a statement.
So, what does this mean for prospective homeowners?
Will Homebuyers Find Opportunities?
In many environments, spring in the Canadian real estate market is usually one of the busiest times of the year. However, according to Jill Oudil, the chair of the Canadian Real Estate Association (CREA), “it may also be the first spring market in a number of years where buyers have a shot at not being out-competed for properties that catch their eye.”
Indeed, this might be one of the best times to acquire a residential property, especially with the average home price near a one-year low. While this remains higher than before the coronavirus pandemic, conditions have stabilized, removing the frenzy and panic that transpired in 2020 and 2021.
With the central bank closer to the end of its quantitative tightening cycle, the Canadian mortgage market may have peaked, meaning that a fixed-rate five-year mortgage may stay at around five per cent for the remainder of the year.
In addition, more listings are coming online, and new housing construction activity is robust. So, ultimately, there is more supply, which can undoubtedly bolster your residential property options.
Now that the Canadian real estate industry is inching closer to balance, what would be some vital home-buying tips? Here are some suggestions:
- Be sure to get pre-approved for a mortgage.
- Work with a real estate agent during the entire buying process.
- Shop within your budget rather than searching for homes above your price range.
- Beef up your down payment to lower payments.
- Provide your best offer first.
“We’re confident that as economic conditions improve and the market continues to even out into Q3/Q4 2023, a more-regular pace of activity will resume. It’s especially critical during challenging economic times, that staying informed and working with an experienced real estate professional can help Canadians clarify some of the unknowns, help them find a home within their means, and ultimately make the best decision possible,” said Elton Ash, the Executive Vice President of RE/MAX Canada, in a statement.
Courtesy: remax.ca
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