The market is seeing a steady return to "saner" conditions, new report says
The Canadian housing market is seeing the steady return of buyers, a trend that is likely to impel home prices higher by the end of 2023, according to new data from Royal LePage.
While the aggregate home price across Canada fell by 9.2% annually to settle at $778,300 during the first quarter of 2023, this was also 2.8% higher on a quarter-over-quarter basis “as buyers began to come off the sidelines following the Bank of Canada’s decision last month to pause interest rate hikes for the first time in a year,” Royal LePage said in the latest edition of its House Price Survey.
“[An] inevitable correction was triggered when the Bank of Canada began to rapidly raise interest rates,” said Phil Soper, president and CEO of Royal LePage. “The downturn came swiftly, and the real estate industry remained depressed for twelve months, a longer correction than the aftermath of the financial crisis thirteen years ago. We have turned the corner and the housing economy is growing again; none too soon for many buyers, who have been waiting patiently for prices to bottom out.”
Royal LePage predicted that taking these trends into account, the national aggregate home price will grow by 4.5% annually during the final quarter of 2023.
“Coming out of a correction, it is common to underestimate the speed at which the market will turn itself around,” Soper said. “As market activity is rebounding quicker than anticipated, we are looking ahead with a sense of cautious optimism. While we do not expect huge price gains this year, some sense of normalcy is returning to the market.”
This gradual return to “saner” market conditions will encourage a significant number of would-be buyers who were hesitant due to the elevated-rate environment.
“Our market data shows that many of those who chose to pause their search to see where prices and interest rates would land have resumed their home buying plans,” Soper said.
“Despite a year of rapidly-rising interest rates, we see that the number of Canadian homeowners who have failed to meet obligations to their financial institution remains exceptionally low. Our banks have managed their mortgage portfolios well, and it helps that unemployment is very low.”
