- June 13, 2023
- Written by Admin
Will The Housing Market in Canada Crash in 2023?
The Canadian housing market has seen more changes in the last 3 years than it has in the last 10 years. To begin with, First-time homebuyers in Canada were priced out of the market in 2021 due to the significant spike in home prices caused by easy access to low-interest mortgages, creating a severe housing affordability issue. Then, in 2022, the Bank of Canada decided to do a series of revisions in interest rates to tighten the monetary policy, making it 4.25% in Dec 2022. These revisions, in turn, significantly impacted the real estate market; the prices started to fall, and the number of transactions was reduced. And finally, inflation began to decrease due to the declining prices and stricter monetary policy.
However, things are looking better for the real estate market as the rates have become steady at 4.5%. The recent announcement regarding the pause of revisions has encouraged buyers to return to the market. In 2023, the housing rates in Canada are expected to stabilise. This is evident as the average home price in Canada has already decreased by about 15.0% from its early 2022 peak and is expected to hold steady this year.
What is the current condition of the Housing Market in Canada in 2023 - Will it recover?
The answer to this question can be categorised in 3 ways.
- Growing economy and a surge in the labour market
If we go with where the data takes us, then it is clear as day that the demand is currently outpacing the supply with the labour market being in a tight situation. The first quarter's economic growth appears to be greater than anticipated in January because of a pickup in exports and high consumption growth. There has been substantial growth in the population that is adding to labour growth, supporting the employment sector, promoting job creation, and raising overall consumption. In essence, the housing market's activity is picking pace and is expected to improve in the coming months. Given the current data and improvement in the number of sales, we expect the market to recover fully.
- Steady rates make way for growing sales
The rate hikes of the year 2022 affected Canada's Housing market in many ways. But after continuous rate hikes, the Bank of Canada finally announced to keep the rates steady at 4.5% in 2023. After this, there was a significant increase in sales on a month-over-month basis, which led to the market getting better, and with the passing months, the price declines have started to get smaller. Potential sellers are waiting for the right moment to list and purchase something new. There is a high possibility that the market may turn into a seller's market because of the decline in new listings and the increase in transactions.
- Improving affordability
This is where Canada's Strong Economy will come into play and contribute to market improvement. See, on a broad level, the economy of Canada is doing well, with low unemployment and a steady GDP. This means that people are comparatively able to afford their mortgages in Ontario and Canada and are less likely to default on their loans which can reduce the risk of a housing market crash.
To wrap up
Although it is hard to predict the future, as there are always potential risks and factors that could contribute to the Housing Market Crash, the numbers and the current state of things definitely make it an unlikely scenario for the foreseeable future. We have a job market that is going in full swing, a demand and supply dynamic where the needs of many real estate aspirants are being met, and interest rates are in the process of normalising. So, if you are a buyer or seller who has been holding back on their real estate goals, then this is an excellent time to start anew. However, we advise you to do thorough research about the market and seek advice from a mortgage expert in Canada before taking any irreversible steps.