Home prices in Canada will drop nearly 25% by the end of 2023: Desjardins

But prices should still be above the pre-pandemic level at the end of 2023

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The average price of homes in Canada is expected to fall 23% by the end of next year, predicts Desjardins Economic Services, a significant downward revision from its previous forecast.

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“The Canadian housing market is correcting quickly, and faster than expected in our pessimistic June forecast,” said Desjardins. In previous forecasts, the Montreal-based financial services firm predicted that home prices nationwide would drop 15% over the same period.

However, Desjardins economists Randall Bartlett, Hélène Bégin and Marc Desormeaux said in their report on Thursday that average house prices had already fallen 15%, or more than 4% in “each of the three months to June. “.

Add to that rapidly falling home sales and rising borrowing costs as the Bank of Canada hikes rates, and the Desjardins team says its “gloomy” outlook is a done deal.

This tweak helps bring some sense back to Canadian real estate

Desjardins Economy

But the housing correction will not be uniform across the country.

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“We continue to believe that house prices will generally fall the most from forecasts in the provinces that have seen the largest gains during the pandemic,” the economists said.

Desjardins expects New Brunswick, Nova Scotia and Prince Edward Island to bear the brunt of a sharply correcting market with prices down 29%, 27% and 25%, respectively, from the peak of February 2022 to December 2023 after increasing by 71, 67 and 62 percent from December 2019 to February 2022.

“We continue to believe that the provinces that saw the largest price increases during the pandemic are most likely to experience the largest price corrections,” the economists wrote.

In British Columbia and Ontario, the behemoths of housing in Canada, where “correction[…]has been more brutal than elsewhere”, Desjardins estimates that prices will fall by 22 and 24%, respectively, between the peak and December 2023. From December 2019 to February 2022, they have increased by 43% and 58% on average.

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For Ontario, Desjardins sees the “greatest price swings” in the Greater Toronto Area.

“However, we expect the pace of price decline to slow as international immigration, the return to work and improved affordability provide tailwinds to the housing market going forward.” , the economists said.

In Quebec, the correction has been “less severe,” the report says, noting that it expects prices to correct 17% by December 2023 after rising 51% between the end of 2019 and the end of 2019. peak in February this year.

Desjardins expects Quebec to fare better because homes are cheaper — the average price there was $510,000 in April compared to $1 million in Ontario in February — and Quebecers are in “better financial form.

The energy-producing provinces of Saskatchewan, Alberta and Newfoundland are poised to make the most of this tumultuous time.

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“They are now benefiting from the post-pandemic tailwinds, mainly in the form of higher commodity prices. The resulting job creation and the workers it will attract from across the country will support existing home sales and prices,” said Desjardins economists.

Prices in these three provinces are expected to fall 4%, 9% and 11%, respectively, between the peak and December 2023, after rising 13%, 23% and 26%.

But there is a “silver lining” to Desjardins’ outlook.

Economists noted that the pace of the decline in sales has slowed since the acceleration in the spring.

Moreover, despite double-digit corrections across the country, prices will nonetheless remain above pre-pandemic levels.

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Additionally, Desjardins expects the Bank of Canada’s key rate to “cap” at 3.25% this year before the central bank returns and begins cutting rates in 2023 as the global economy slows. real estate is slowing down the economy.

“The slowdown in the Canadian housing market is creating challenges for households. Home sales and prices have contracted rapidly and are expected to decline further over the next 18 months. While we don’t want to alleviate the difficulties that some Canadians are facing, this adjustment helps bring some sense back to Canadian real estate,” the report says.

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