Canadian home sales could fall an average of 23% this year and remain weak at an average decline of 12% in 2023, according to a report from TD Economics.
The report, released on Wednesday last week, follows a series of interest rate hikes by the Bank of Canada as inflation continued to hit record highs.
According to the report, TD expects soaring borrowing costs to “weigh heavily on real estate activity.” The bank forecasts a “33% decline in peak to trough Canadian home sales between Q1 2022 and Q1 2023.” After this period, real estate activity is expected to “firm up” as interest rates decline from their multi-year highs, but still remain at low levels.
The bank sharply cut its home sales and price forecast from March, “as monetary policy tightened more sharply than expected.”
With demand falling, average home prices in Canada are expected to fall between the first quarter of 2022 and the first quarter of 2023, with a projected decline of 19% from peak to trough. But prices are expected to rise slightly after this period, with some recovery in demand.
In the report, TD sees average home sales and prices decline the most in British Columbia and Ontario for 2022 and 2023. Quebec, meanwhile, is expected to see “relatively modest price growth due to the noticeable deterioration in affordability since the start of 2020”.
In June, TD raised its key rate by 50 basis points, or half a percentage point, to 1.5%. Previously, the bank had also raised its key rate in March and then in April. A new rate announcement is scheduled for July 13.
Information for this briefing was found via TD Economics and the sources mentioned. The author has no security or affiliation related to the organizations discussed. Not a buy or sell recommendation. Always do additional research and consult a professional before purchasing a title. The author holds no license.