The Canadian Real Estate Association has revised its predictions for home sales and prices this year, citing weakened conditions in Ontario and B.C. The association now anticipates a nearly 10 percent decrease in the number of residential properties changing hands compared to 2022.
In their quarterly update, the association projected approximately 449,614 residential property sales through Canadian MLS systems in 2023, marking a 9.8 percent decline from the previous year. Additionally, they foresee the national average home price dropping by 3.3 percent on an annual basis to $680,686 in 2023.
This revised forecast, a shift from the July expectations of a 6.8 percent sales decline and a 0.2 percent price drop, reflects the challenging impact of high-interest rates. Davelle Morrison, a Toronto-based realtor, noted the squeeze felt by many due to these rates, leading to fewer market participants. However, for those actively in the market, the reduced competition presents an advantageous situation.
The report highlighted an increase in new property listings since Labour Day; however, this surge in supply hasn’t translated into a surge in sales. The national sales-to-new listings ratio has dropped from almost 70 percent to 50 percent within five months.
BMO Capital Markets economist Robert Kavcic noted the struggle in demand due to heightened mortgage rates, causing a tilt in market balance and potential downward pressure on prices in certain markets.
While weak market conditions earlier in the year deterred some potential buyers, the evolving circumstances might encourage action in 2024, especially for those who need to make property or location changes.
The major risk to the forecast, according to CREA, lies in the Bank of Canada’s key interest rate and its trajectory leading up to spring next year
In September, CREA reported a 1.9 percent increase in home sales compared to the same month the previous year. However, on a month-over-month basis, sales in September dipped by 1.9 percent.
The actual national average home price in September was $655,507, marking a 2.5 percent increase from September 2022. The aggregate home price Index experienced a 0.3 percent decline on a month-over-month basis in September, attributed to trends in Ontario, while prices across other provinces were still rising, albeit at a slower pace.
Looking ahead, upcoming data will shed light on whether Ontario’s price trends are an outlier or a precursor to similar softening trends expected in other parts of the country, considering the current interest rate landscape. Despite the challenges, the evolving price trend has presented buying opportunities, making previously unaffordable properties attainable for some buyers.
