If clients are managing a real estate portfolio as part of their assets, particularly if they require those assets soon for retirement, they may be looking at the real estate market with some trepidation following Bank of Canada interest rate hikes.
According to the Canadian Real Estate Association (CREA), actual monthly activity in December 2022 came in 39.1 per cent lower than December 2021 activity numbers. The national average sale price posted a 12 per cent year-over-year decline in December 2022.
“In 2022 we saw one of the biggest single-year shifts on record in Canadian housing activity, from record highs last winter to just below the 10-year average to end the year,” says Jill Oudil, the real estate association’s chair.
That said, the association also published its 2023 and extended 2024 outlook for national home sales activity, populating the outlook with an additional six months of data that wasn’t available when the association published its outlook in September 2022.
“Home sales have been more or less stable since the summer, suggesting the downward adjustment to sales activity from rising interest rates and high uncertainty may be in the rear-view mirror,” they write. “With significantly higher borrowing costs, it’s not surprising prices have mostly cooled from their peaks in more expensive markets within Ontario and British Columbia. Prices have been holding up much better in Alberta, Saskatchewan and Newfoundland and Labrador, with Quebec and the Maritime provinces landing somewhere in between.”
They add that home prices remain mixed across Canada, with most markets declining from their short-lived, sharp peaks observed in early 2022. For perspective, they also add that markets remain well above where they were in the summer of 2020.
“The theme of our 2023 forecast is not recovery, but the start of a turnaround,” they continue. “It will likely remain quite difficult for first-time buyers to enter the housing market until mortgage rates are lower than they are today.” Others, meanwhile, will likely find the first opportunities in some time to purchase while not needing to compete with multiple offers.
The national average home price is forecast to decline 5.9 per cent on an annual basis in 2023. This is forecast to recover 3.5 per cent between 2023 and 2024, bringing prices back on par with those observed in 2021.