The price of buying a home in Ontario dropped from its lofty heights during the past year, and the question for 2023 is whether the downward trend will continue.
The Canadian Real Estate Association (CREA) benchmark price of a home in Ontario — a measure that combines sale prices of condominiums, attached and detached houses across all markets in the province — peaked at $1.08 million in March of 2022.
That was a staggering 64 per cent leap in just two years, from the start of the COVID-19 pandemic.
CREA’s benchmark figure for Ontario has since fallen by nearly 20 per cent, but even that sharp decline only takes prices back to the level they were at in September of 2021.
How much lower will home prices in this province go? With the number of homes bought and sold monthly now lower than it’s been per capita since the mid-1990s, when will the real estate market start to pick up again?
CBC News surveyed real estate experts and analyzed published forecasts to give you this preview of the Ontario housing market for 2023.
This home in Toronto’s east end was first listed for $1.849 million, relisted for $100,000 less and ultimately sold in October 2022 for $1.65 million, according to data from the real estate firm Realosophy. (Showwei Chu/CBC)
Overall, real estate analysts generally expect home prices to continue to fall, but not a lot further than they already have.
Rishi Sondhi, of TD Economics, forecasts prices in Ontario will decline through early 2023 but bottom out in the second half of the year.
“We are expecting further downside [to prices] but less relative to what we’ve seen so far,” said Sondhi in an interview.
“We think that the bulk of the correction … is behind us.”
That’s partly because there are some signals that the bulk of the Bank of Canada’s interest rate hikes are behind it. The central bank raised its standard-setting benchmark rate seven times in 2022 in an attempt to tackle inflation
Condo projects could be cancelled
Randall Bartlett, senior director of Canadian economics with Desjardins, says it’s an open question when Ontario home prices will stop dropping because various factors on the supply and demand side are pulling in opposite directions.
Those higher interest rates have been the biggest factor dampening demand. However, Bartlett points out employment levels remain strong and immigration numbers are expected to rise, fuelling demand for housing.
The Canada Mortgage and Housing Corp. is predicting headwinds for new condo construction in the Greater Toronto Area. ‘Higher construction costs and interest rates could lead to project cancellations or delays in project launches and dampen homebuying activity,” said the CMHC in a recent housing supply report. (Patrick Morrell/CBC)
On the supply side, many property owners are reluctant to list their properties given how the prices dropped, yet many investors could be forced to sell due to the higher carrying costs of those high interest rates.
There are also signs that the recently rapid pace of new home construction is slowing. The Canada Mortgage and Housing Corp. (CMHC) recently warned that in the Greater Toronto Area, the combination of a sharp drop in condo pre-construction sales, higher building costs and higher interest rates “could lead to project cancellations or delays in project launches.”
“We’re in a very different environment,” said Bartlett. “Demand has cooled off, prices have come down, interest rates are higher.”
He says this could have an impact on the supply of new housing coming on the market in the latter half of 2023.
Mark Ostland, a real estate expert with Meridian, Ontario’s largest credit union, says if the Bank of Canada is done raising rates, that will give more confidence to potential buyers.
Volume of listings expected to remain low
“We are in what I call ‘even-steven times’ at the moment,” said Ostland in an interview.
“On the one hand, we’ve got more affordable home prices than we’ve seen in the last couple of years. But on the other hand, we have the continued rising interest rates that are affecting buyers’ ability to qualify for the mortgage amount they need.”
Real estate analysts generally believe the volume of listings and sales in Ontario will remain low for some time to come.
This graph from the Canadian Real Estate Association shows how its benchmark home price in Ontario has changed over the years, with a steep drop since peaking in March 2022. The benchmark price is calculated from the composite value of sales through the MLS real estate system. (CREA)
“People really don’t want to list their homes when sales and prices are falling, for obvious reasons, and so far, that factor is sort of winning out and keeping supply relatively subdued,” said Sondhi.
Every month since June, home sales numbers in the Greater Toronto Area have been at their absolute lowest in more than a decade — with the exception of the lockdown-affected period in the spring of 2020.
“Sharply higher interest rates and the considerable loss of affordability continue to challenge buyers. And we think they will keep the market quiet for some time to come,” said RBC economist Robert Hogue in his housing market report in December.
On the price side, Hogue noted that Toronto-area prices have fallen 18 per cent from their peak and said “any further depreciation is likely to be more incremental.”
GTA vs. rest of Ontario
ReMax, one of Canada’s largest real estate firms, forecasts prices in the Greater Toronto Area will decline to their 2021 levels, a roughly 11 per cent drop from the average this year.
There’s debate about what will happen to housing markets elsewhere in Ontario that saw astonishingly high run-ups in prices over the past two years.
In the fall of 2021, this house in Toronto sold for $1.9 million, more than $500,000 over the asking price. (CBC)
“Our view is that markets outside of the GTA actually have further to fall than the GTA has,” said Bartlett.
Ontario’s smaller cities have a greater proportion of houses to condos than in the Toronto area and that’s one reason why they remain more vulnerable to further drops in 2023: Prices for condos have been somewhat less volatile than for houses.
ReMax’s 2023 real estate outlook predicts average price declines of up to 15 per cent in London, Kitchener-Waterloo, Barrie, and the Georgian Bay area, while forecasting modest price increases of two to eight per cent in the rest of the province, including Ottawa, Hamilton, Windsor and Sudbury.
Nationally, the CMHC is forecasting the average sale price across Canada to continue to decline until the second quarter of 2023.
The coming year will provide an early test of Premier Doug Ford’s promise to pave the way for 1.5 million new homes to be built in Ontario in a decade.
The Ford government has used the housing supply crunch as its justification for recent moves to limit what municipalities can charge for development fees, weaken the powers of conservation authorities and open up pockets of the Greenbelt to housing.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
