While the Canadian housing market appears to be entering the end-stages of its downturn, RBC predicts that rising interest rates and a loss of affordability will keep the national market quiet in early 2023.
In October, national home sales increased for the first time in eight months, and home prices saw the smallest drop since May.
The fall in home prices has been steady over the year, with the national home price slipping -0.8 per cent below last year’s level and 10 per cent below the peak in February.
Ontario and British Columbia have seen the largest losses, with Cambridge, London, Brantford and Chilliwack recording the steepest HPI drops of 18 per cent or more since their peak.
Canada’s more expensive markets in Toronto and Vancouver also saw price declines of 11 per cent and 5.3 per cent respectively since their peaks. But this doesn’t mark a turning point just yet, as affordability issues will still place downward pressure on property values in these areas.
While the rest of the national market experiences low activity and further price declines, Calgary is in a world of its own. Activity in the Calgary market remains higher than pre-pandemic levels, and home prices have remained stationary since April – two trends that are expected to continue in the region as demand-supply conditions are tight.
All signs point to an eventual inflection point – but don’t expect the market to heat back up anytime soon. High interest rates will still pose a challenge for prospective buyers even as prices continue to decline into the spring.