The nationwide brokerage's latest outlook calls for modest easing of prices despite the weaker Canadian housing market
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What will happen to Canadian house prices in 2023? It’s a big question for homeowners including investors in residential real estate.
While 2022’s interest rate increases and inflation challenges have led to a more subdued market and price corrections, next year should see only modest negative impact on house prices.
A new outlook from nationwide brokerage Royal LePage (RLP) calls for a 1% decline in the national aggregate price of a home, to $765,171 in the fourth quarter of 2023.
RLP sees the median price of a single-family detached property to drop 2% to $781,256 while condos will see a 1% decline to $568,933.
The overall decline will be offset by modest gains in the third and fourth quarters of 2023, the outlook says. That means the scary time for homeowners will be the first half of the year.
The aggregate price of a home in Canada is forecast to be 12% lower year-over-year in Q1 of 2023, and down 2.4% from Q4 2022. In the second quarter of next year, prices will be 7.5% lower year-over-year, and remain virtually flat on a quarterly basis.
RLP’s president and CEO, Phil Soper, says that the past two years has seen low borrowing costs, record home price appreciation, and an inevitable downward slide.
"In an era characterized by the unusual, this correction has not followed historical patterns. While the volume of homes trading hands has dropped steeply, home prices have held on, with relatively modest declines. We see this as a continuing trend," he said.
Supporting factors
Soper explains that some key elements that support the housing market remain strong.
The relatively low number of homes available to buy, a long-term issue for the market, means that demand outweighs supply. And low unemployment means fewer people having to sell their homes for financial reasons.
Economic downturn typically means spikes in unemployment and mortgage payment defaults, but that has not been the case so far.
"We have a tightly managed national mortgage portfolio, with historically low default rates, supported by homeowners who have been required to qualify for a loan under the strict federal stress test for the last five years,” added Soper.