Friday August 4, 2023
Introduction
As we step into 2023, a recent report by CMHC says that the Canadian housing market faces significant challenges driven by the lingering impacts of weaker economic growth. Home prices and housing starts are projected to decline further this year, putting pressure on affordability and pushing demand towards rental units. While the road ahead may seem challenging, experts foresee a potential recovery starting in 2023 or 2024.
This blog looking at the Canadian Housing Market: 2023 explores the key factors influencing the housing market in 2023 and beyond, shedding light on regional variations and potential solutions to address housing supply challenges.
Impact of Weaker Economic Growth on Housing Market
Weaker economic growth continues to cast its shadow over the Canadian housing market in 2023. The effects of the pandemic, coupled with higher mortgage rates and slower income and job growth, have resulted in a decrease in home prices nationwide. Experts predict that the average national price may not return to pre-pandemic levels, with the price drop expected to bottom out sometime in 2023. As a consequence, potential buyers are finding it increasingly difficult to enter the market.
Affordability Challenges and Limited Supply
Despite the overall decrease in home prices, certain markets are still witnessing elevated prices. The combination of higher prices, rising mortgage rates, and limited new housing supply is making homeownership even less affordable in 2023. This situation is particularly pronounced in Canada’s most expensive markets, such as Vancouver and Toronto, where soaring rents and limited housing availability pose significant challenges.
Tightening Rental Markets
The affordability crisis in the homeownership market is pushing more individuals towards the rental sector. This surge in demand for rental units will likely drive up rents, making them even more unaffordable. Vancouver and Toronto, being the priciest markets, will be most affected by the escalating rents and constrained housing supply. This calls for innovative solutions across the industry to boost the supply of affordable rental housing.
Hope on the Horizon: Recovery Projected
Despite the current challenges, experts project a recovery beginning in 2023 or 2024. Forecasts indicate that prices and sales will start to rise again, while inflation is expected to hit its 2% target by the end of 2025. The anticipated drop in mortgage rates after 2023, coupled with renewed growth in income and employment, will provide much-needed support to housing demand and supply.
Regional Highlights
Regional variations play a crucial role in the Canadian housing market outlook for 2023. At Modern Solution Realty, we have reason to believe that the prairie provinces are expected to experience more favorable conditions, thanks to interprovincial migration and relatively affordable homeownership options. However, Ontario, British Columbia, and Québec are likely to witness significant declines in housing starts, further exacerbating supply constraints in key markets like Toronto, Vancouver, and Montréal.
On the other hand, the Atlantic region’s economy and housing market conditions are projected to remain stable and moderate compared to other regions.
Conclusion
The Canadian housing market faces significant headwinds in 2023, with weaker economic growth impacting home prices and housing starts. Affordability challenges and limited supply further compound the situation, leading more individuals towards the rental market. However, experts are optimistic about a potential recovery starting in 2023 or 2024, with supportive factors like lower mortgage rates and improved economic conditions.
As we continue to navigate these uncertain times, staying informed through comprehensive analysis and reports will be instrumental in making informed decisions and developing effective solutions to address housing supply challenges. We also encourage you to contact one of our professionals to help you navigate your real estate decision in the best way possible. With a total 2% Commission Model – with the Seller and Buying agent paid 1% each, we are your go to for any real estate transaction through Ontario.
