But the housing correction won’t be even across the country.This adjustment is helping to bring some sanity back to Canadian real estate
Desjardins said it's expecting a sharp correction in the housing market, but prices will stay above pre-pandemic levels. Find out more.financialpost.com
Canadian home prices set to drop by almost 25% by end of 2023: DesjardinsBut prices are still expected to be above the pre-pandemic level at the end of 2023
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Aug 11, 2022 • August 11, 2022 • 3 minute read • 9 Comments
Desjardins says it's expecting a sharp correction in the housing market. ASHLEY FRASER, POSTMEDIA PHOTO BY ASHLEY FRASER/POSTMEDIA
Article contentThe average home price in Canada is expected to fall 23 per cent by the end of next year, predicts Desjardins Economics, in a significant downgrade to its earlier forecast.
“Canada’s housing market is correcting quickly, and faster than we anticipated in our downbeat June forecast,” Desjardins said. In the previous forecast, the Montreal-based financial services company predicted national home prices would fall 15 per cent during the same period.
However, Desjardins economists Randall Bartlett, Helène Begin and Marc Desormeaux said in their report Thursday that average housing prices have already dropped 15 per cent, or more than four per cent in “each of the three months through June.”
Add in rapidly falling home sales and rising borrowing costs as the Bank of Canada hikes rates, and the Desjardins team said their “gloomier” outlook was a done deal.
But the housing correction won’t be even across the country.
“We continue to believe that home prices will generally fall the most over the forecast in provinces that saw the largest gains during the pandemic,” the economists said.
Desjardins predicts New Brunswick, Nova Scotia and P.E.I. will bear the brunt of a sharply correcting market with prices falling by 29, 27 and 25 per cent, respectively, from the peak in February 2022 to December 2023 after having risen 71, 67 and 62 per cent from December 2019 to February 2022.
“We continue to believe that provinces that saw the biggest price gains during the pandemic are most likely to see the largest price corrections,” the economists wrote.
In B.C. and Ontario, Canada’s housing juggernauts, where “the correction … has been more abrupt than elsewhere,” Desjardins estimates that prices will fall 22 and 24 per cent, respectively, from the peak to December 2023. From December 2019 to February 2022, they rose 43 per cent and 58 per cent on an average basis.
For Ontario, Desjardins sees the “biggest price swings” in the Greater Toronto Area.
“However, we expect the pace of price decline to slow as international immigration, 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 said, noting it expects prices to correct 17 per cent by December 2023 after rising 51 per cent from the end of 2019 to the peak in February of this year.
Desjardins expects Quebec to fare better because homes are cheaper — the average price there was $510,000 in April compared with $1 million in Ontario in February — and Quebecers are in “better financial shape.”
The energy-producing provinces of Saskatchewan, Alberta and Newfoundland are poised to fare the best during this tumultuous period.
“They’re now benefiting from post-pandemic tailwinds, largely in the form of higher commodity prices. The resulting job creation and workers it attracts from across the country will provide support to existing home sales and prices,” the Desjardins economists said.
Prices in those three provinces are forecast to drop a more modest four, nine and 11 per cent, respectively, from the peak to December 2023 after having risen 13, 23 and 26 per cent.
But there is a “silver lining” to Desjardins’ outlook.
The economists noted the pace of decline in sales has cooled since accelerating in the spring.
Also, despite the double-digit corrections across the country, prices will nonetheless remain above pre-pandemic levels.