Canadians could see housing prices drop by as much as 18% by the end of 2023, according to a new real estate outlook report.
The report comes as, like recent U.S. Federal Reserve actions, the Bank of Canada raises interest rates in an attempt to reign in out-of-control inflation. Housing prices in the U.S. have risen by 20% yet, experts believe continued increases could also put the U.S in a likely housing bubble.
Canada’s average home price rose by 50 percent over the past two years, from nearly $530,000 at the end of 2019 to just over $790,000 at its peak in February 2022, notes the French-language report, published on June 8 by Desjardins, a Canadian financial services cooperation.
The report said average property prices have steadily declined after the central bank began raising a key overnight interest rate in March. The month-to-month average home price in the country fell by 2.6 percent in March compared to February, and again by 3.8 percent in April.
The report said the 15 percent drop will mean a national average price of $675,000 by December 2023, but noted that the 15 percent figure will apply mainly to provinces and regions that saw the fastest property price hikes during the pandemic.
It also noted higher borrowing costs can be expected going forward, which will weaken sales overall and adversely impact households that are more vulnerable to interest rate hikes, thereby maintaining downward pressure on home prices.
“But let us be clear: we are considering a correction, not a collapse, of the Canadian housing market,” the report said. “Therefore, while some Canadians may lose their sleeves, we don’t expect them to lose the rest of their shirt.”
Ontario’s housing prices are expected to decline by 18 percent but may differ from region to region.