GTA home prices will continue to fall through 2023

Home prices in Canada will fall through 2023, giving buyers more bargaining power, according to a new report from Re/Max. But still high interest rates will continue to dash the hopes of first-time buyers and curb sales.

Average residential home prices are expected to decline 3.3% in 2023, with the biggest declines expected in Ontario and Western Canada, while Atlantic Canada will see an increase, according to a Nov. 29 Re/Max report.

Lower prices will lead to a balanced market — when demand matches supply — in 60% of Canada’s regions.

The average sale price in the GTA is expected to fall nearly 12% in the spring of 2023 from the peak in February 2022, the report adds.

« Most of the price adjustments have already taken place, » said Cameron Forbes, Re/Max Realtron realtor.

The average sale price of a home in October was $1.09 million, which will drop to $1.05 million in 2023, he added.

« We expect prices to come down a bit more, around 3%, but the worst is behind us. »

Single-detached homes remain the main housing type of interest to buyers in the Greater Toronto Area, with sales picking up since the summer after prices fell sharply.

But some housing experts say the Re/Max forecast is optimistic. Economists have predicted that home prices nationwide will fall another 10-15% by the spring of 2023. And in the GTA, home prices have already fallen nearly 20% since February’s high. 2022.

The Re/Max report calculates the drop in the price of GTA homes by taking the average price for October and comparing it to the average GTA sale price for all of 2022, which is $1.19 million – showing an 8.5% drop in the sale price.

“Given the high level of interest rates, their forecasts are rather optimistic. We expect there to be another decline of around 10%. The Re/Max forecasts for the GTA are also more conservative because they use the annual average,” said Stephen Brown, senior Canadian economist at Capital Economics, an independent economic research firm.

The Bank of Canada is expected to raise the overnight rate by another 0.25 or 0.5 percentage points on December 7, again raising interest rates on mortgages. Economists predict that interest rates will remain high in 2023, continuing to put downward pressure on house prices.

Since March 2022, the Bank of Canada has raised the overnight rate six times, from 0.5% to 3.75%. Mortgage rates have risen from historic lows of 1.5% to over 5%, spooking potential buyers.

« Prices won’t come down as quickly as what we saw in the first half of 2022, but it’s good to go with what the majority of economists are saying about where house prices will go, so we’ll see a further decline in more than three percent, but it will be gradual next year,” said John Pasalis, president of real estate brokerage Realosophy.

However, there are some benefits to higher interest rates that put downward pressure on house prices, Forbes said.

Homebuyers face less competition when looking for a property and can put conditions on an offer, such as a home inspection, which was nearly impossible to do during January’s homebuyer frenzy and February 2022.

In Toronto, many homeowners looking to purchase a larger property already have substantial equity in their home, making the purchase feasible. The same can be said for young families in condos who bought before the pandemic, Forbes said, because a condo will have appreciated in value over the course of three or more years.

Because there is less competition, it allows buyers to take their time when considering buying a property. Homes are now on the market for 45 to 90 days, indicating a more balanced market, said Christopher Alexander, president of Re/Max Canada.

However, for first-time home buyers, it will be difficult to enter the market when interest rates are high and home prices are still out of reach for many, Brown said.

« When we look at accessibility metrics, it’s the highest since the 80s and early 90s, » he said. “Buying a home is still expensive and is only possible for a small part of the population. It will be a struggle for many to afford a home,” he added.

Economists also predicted there would be more forced sales — where landlords sell quickly due to financial hardship — but many have instead placed their property on the lucrative rental market, Brown said.

But even with a more balanced market, there won’t be a flood of activity anytime soon, experts say. Sales and listings are both at 20-year lows, meaning there’s little inventory and little demand, bringing « some stability » to the market, Pasalis said.

« Going into the new year, I don’t expect these numbers (for sales and listings) to change that much, buyers won’t be rushing into the market anytime soon, » he said. .


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