The price of buying a home in Ontario dropped from its peak during the past year, raising the question of whether the downward trend will continue in 2023. The Canadian Real Estate Association (CREA) recorded a benchmark price of $1.08 million for a home in Ontario in March 2022, a staggering 64 percent increase over two years. However, the benchmark figure has since fallen by nearly 20 percent, bringing prices back to September 2021 levels. This raises the question: How much lower will home prices go in Ontario? CBC News has surveyed real estate experts and analyzed forecasts to provide a preview of the Ontario housing market for 2023.
Prices expected to stabilize
Real estate analysts generally expect home prices in Ontario to continue falling, but not significantly further than they already have. Rishi Sondhi, of TD Economics, predicts that prices in Ontario will decline through early 2023 and then stabilize in the second half of the year. "We are expecting further downside [to prices], but less relative to what we've seen so far," said Sondhi. He believes that the bulk of the price correction is behind us, as there are indications that the Bank of Canada's interest rate hikes have reached their peak.
Condo projects at risk
Randall Bartlett, senior director of Canadian economics with Desjardins, acknowledges that several factors on the supply and demand side are affecting Ontario home prices. Higher interest rates have been the primary factor dampening demand. However, Bartlett highlights that employment levels remain strong and immigration numbers are expected to rise, fueling housing demand. On the supply side, many property owners are hesitant to list their properties due to the drop in prices, while investors may be forced to sell due to higher interest rates. Additionally, the pace of new home construction is slowing, which could lead to project cancellations or delays in launching new developments. The combination of these factors creates an uncertain outlook for the supply of housing in the latter half of 2023.
Volume of listings remains low
Real estate analysts anticipate that the volume of listings and sales in Ontario will remain low for some time. Homeowners are hesitant to list their properties when prices are falling, which has kept the supply relatively subdued. Since June, home sales numbers in the Greater Toronto Area have been at their lowest in over a decade, except for the period affected by the lockdown in spring 2020. The combination of significantly higher interest rates and reduced affordability has put a strain on buyers, resulting in a subdued housing market. While further price depreciation is likely to be incremental, the market is expected to remain quiet in the foreseeable future.
GTA vs. rest of Ontario
ReMax, one of Canada's largest real estate firms, predicts that prices in the Greater Toronto Area will decline to their 2021 levels, representing an approximately 11 percent drop from the average this year. However, there is debate regarding housing markets in other parts of Ontario that experienced substantial price increases in the past two years. Ontario's smaller cities have a higher proportion of houses compared to condos than in the Toronto area. This makes them more vulnerable to further price drops in 2023, as condos have been less volatile in terms of price fluctuations. ReMax's 2023 real estate outlook predicts average price declines of up to 15 percent in cities like London, Kitchener-Waterloo, Barrie, and the Georgian Bay area. On the other hand, modest price increases of two to eight percent are expected in the rest of the province, including Ottawa, Hamilton, Windsor, and Sudbury.
The Canada Mortgage and Housing Corp. forecasts the average home sale price to continue declining across Canada until the second quarter of 2023. The coming year will be a crucial test of Premier Doug Ford's promise to facilitate the construction of 1.5 million new homes in Ontario within a decade. The government's recent actions, such as limiting development fees charged by municipalities and opening up parts of the Greenbelt to housing, aim to address the housing supply shortage. Only time will tell if these measures will have the desired effect.