The average priced Canadian home is roughly 32% more expensive than the borrowing capacity of median-income households
Canada’s residential prices could fall by 10% come early next year, although home purchases will likely not return to a semblance of affordability for several years, according to Tony Stillo of Oxford Economics.
During the second quarter, the average priced Canadian home was approximately 32% beyond the borrowing capacity of median-income households, Bloomberg data indicated.
Stillo said that the upward trend in home prices is “far from over”.
“We think we’re halfway through the upswing we’ve seen in resale housing markets this spring, [and] we think it’s waning,” Stillo said in an interview with BNN Bloomberg.
Stillo is anticipating prices to reach a peak this summer, followed by the 10% decline he is projecting for early 2024.
Canadian Real Estate Association (CREA) senior economist Shaun Cathcart noted that while a bumpy ride could be in store in the coming years, home prices were likely to continue climbing.https://t.co/q0c0yiWKRl#mortgagenews #industrytrends #homesales #houseprices
— Canadian Mortgage Professional Magazine (@CMPmagazine) June 22, 2023
“By the middle of next year, we are looking for prices to have fallen from their 2022 peak by about 20% to 25%,” Stillo said.
Housing affordability is still years away
However, Stillo is expecting the lack of affordability to worsen in the near term as the Bank of Canada’s benchmark interest rate is likely to remain in its multi-decade high of 5% for a prolonged period.
“It will be a couple of years before we see improvements in affordability,” Stillo said.
“We don’t think housing affordability Canada-wide will be within the reach of the average household until 2027, once prices settle down to a lower level, incomes grow, and interest rates [gradually] return to a somewhat lower level.”
