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Will Ontario Home Prices Decline in 2023?

Posted by Editor on March 19, 2023
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The Canadian housing market experienced a significant boom in the summer of 2021, as you are likely aware if you have followed it at all over the past couple of years. A significant increase in home asking and selling prices as a result of strong buyer demand contributed to this boom.

The average home sale price in Ontario was just under $600,000 in April 2020, at the beginning of the pandemic. That amount increased to over $880,000 in September 2021.

You might be interested in learning what will happen in 2023 now that the housing boom has slowed and prices have begun to level off and decline.

Here is a look at the 2022 real estate market as well as a forecast for 2023

 

National Statistics for 2022 from the Canadian Real Estate Association (CREA).

 

In a recent report, the CREA examined the average national price of homes as well as other crucial gauges of the market’s temperature for the year or quarter.

Some Important Highlights:.

The following are the data points that were highlighted in the report on the Canadian housing market:.

  • National home sales declined by 3.3% month over month in November 2022.
  • The actual (not seasonally adjusted) monthly activity was 38.9% below November 2021.
  • The MLS Home Price Index (HPI) had a 1.4 per cent drop month over month and decreased 4.4% year over year.
  • The actual (not seasonally adjusted) national average sale price posted a 12% year-over-year decline in November.

In terms of real estate transactions and home sales, the final quarter of 2022 actually saw a decline.

The actual (not seasonally adjusted) number of transactions in November 2022 was “38.9 percent below a near-record for that month last year and stood at about 13 percent below the pre-COVID-19 10-year average for November sales,” according to the report. “.

 

Will House Prices Drop In Ontario 2023?

Increasing Interest rates

Numerous factors, most notably the nation’s high interest rates and the consequences of inflation, can be blamed for the declining home sales. The Bank of Canada raised interest rates several times in 2022. The interest rate is 4 points and 25 percent as of December 2022, which is a significant increase from the rate of 0 points and 25 percent in March.

 

These higher interest rates are modified for inflation. The Canadian central bank has changed interest rates to reflect rising inflation in the domestic economy.

 

What Was The 2022 National Average Home Price In The Housing Market?

 

The CREA also publishes statistics on national average home prices.

“The actual (not seasonally adjusted) national average home price was $632,802 in November 2022, down 13% from the same month last year,” the report states. Sales in Canada’s two busiest and most expensive housing markets, Greater Vancouver and the GTA [Greater Toronto Area], have a significant impact on the country’s average price. The national average is reduced by more than $123,000 by leaving these two markets out of the calculation. “.

The CREA also offers a price map that shows the typical home prices by province and territory. These prices are as follows:.

 

  • British Columbia: $904,020
  • Alberta: $422,709
  • Saskatchewan: $321,000
  • Manitoba: $330,742
  • Ontario: $829,934
  • Quebec: $479,787
  • New Brunswick: $269,800
  • Newfoundland/Labrador: $280,200
  • Nova Scotia: $368,600
  • Prince Edward Island: $355,000
  • Yukon: $498,567
  • Northwest Territories: $392,255

As we can see, even though Ontario’s average home prices are still significantly higher than they were in the past, they have decreased from the price in 2021.

 

For 2023, predictions and forecasts.

The housing market started to slow down at the end of 2022. The declining home sales, a slight drop in home values, and a lack of interest in housing are clear indicators of this. As 2023 begins, there are a few predictions and forecasts that we should be aware of.

Despite the fact that home prices have slightly decreased, a sharp decline is unlikely. Even though the housing market is stabilizing and cooling off, affordability is not anticipated to rise, particularly in Ontario.

Even though the supply of homes has remained the same or increased due to high interest and mortgage rates, market demand has decreased. Due to the fact that many homeowners are opting to save money rather than purchase a home, there are fewer buyers hoping to make a sale in the Canadian housing market.

Rent costs are also anticipated to increase as a result of the high rates, particularly in major cities like Toronto, Montreal, and Halifax.

However, two banks (Desjardins and TD Economics) concur that a 25% decline in home prices is anticipated by the end of 2023, particularly in provinces other than Ontario. Prices are predicted to drop by 15% in smaller cities, particularly in the London, Kitchener Waterloo, Barrie, and Georgian Bay Area.

 

What is the predicted 2023 average home price?

Prices for homes in Ontario are expected to drop slightly. The national average price of a home in Canada is anticipated to drop by about 1% to just over $750,000 by the fourth quarter of 2023.

 

Affordable housing on the market.

Home prices are anticipated to decline slightly, though the housing market is not expected to crash or have any significant effects. However, neither a sharp decline nor any significant advancements in housing affordability are anticipated.

Real estate costs in Canada have been independent of wages and incomes for a considerable amount of time. The average person may not be able to afford a listing even if prices are declining across the inventory of listings.

Since interest rates have increased, as we mentioned above, many property owners are now more concerned than ever about their mortgage payments. A lot of homeowners have chosen to rent out investment single detached homes or even the basement of their primary residence in order to make up the difference between their mortgage payments and rental income. The rent prices are quite high and are not anticipated to decrease because they must in order to manage their mortgage payments. The housing market in Canada is therefore becoming increasingly out of reach for a large number of people.

 

What is the predicted 2023 average home price?

Prices for homes in Ontario are expected to drop slightly. The national average price of a home in Canada is anticipated to drop by about 1% to just over $750,000 by the fourth quarter of 2023.

 

Affordability in the Housing Market 

Home prices are anticipated to decline slightly, though the housing market is not expected to crash or have any significant effects. However, neither a sharp decline nor any significant advancements in housing affordability are anticipated.

Real estate costs in Canada have been independent of wages and incomes for a considerable amount of time. The average person may not be able to afford a listing even if prices are declining across the inventory of listings.

Since interest rates have increased, as we mentioned above, many property owners are now more concerned than ever about their mortgage payments. A lot of homeowners have chosen to rent out investment single detached homes or even the basement of their primary residence in order to make up the difference between their mortgage payments and rental income. The rent prices are quite high and are not anticipated to decrease because they must in order to manage their mortgage payments. The housing market in Canada is therefore becoming increasingly out of reach for a large number of people.

Immigration’s impact on the housing market is a further factor in the real estate forecast for 2023. With the recent spike in immigration to Canada, there has been a greater need for new housing. To increase housing affordability for Canadian citizens, non-Canadians will be prohibited from buying homes in Canada (with some exceptions) starting in January 2023 for two years.

 

Conclusion.

Over the past few months, the housing supply and prices in Canada’s housing markets have increased in tandem. More and more homeowners are choosing to save rather than sell their homes. Prices in many Canadian cities are expected to decrease in 2023, but not significantly enough for many people to find them more affordable.

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