Mortgage Basics

Canada Housing Market Outlook as of Today

Canada Housing Market Outlook as of Today
Written by
  • Tvine Donabedian
| 17 March 2023
Reviewed, 18 May 2023

Table of contents

    The 2023 housing market in Canada is so far off to a rough start, with home sales kicking off the new year at a 14-year low. Canada has not seen a month with such few sales since 2009. 

    In a report released on February 15th, 2023, the Canadian Real Estate Association (CREA) noted a 3.3% increase in newly listed homes, led mainly by increases across British Columbia. However, new listings have remained at a historical low nationwide despite this increase. New supplies in January 2023 remained at their lowest levels since 2000. 

    The Bank of Canada (BoC) announced on March 8th that it would hold its overnight rate steady at 4.5% after 8 consecutive interest rate hikes – the last being a 25 basis-point increase on January 25th, 2023. It is predicted that the BoC will continue to hold rates steady at 4.5% throughout 2023 to assess the impacts these past increases have had on the economy. They may then begin to ease rates, bringing them down again in 2024.

    Will home prices increase in 2023-2024?

    Forecasts from Canada’s banks and analysts predict that 2023 will continue to see a steep decline in home prices and sales – though there doesn’t seem to be a consensus on how much of a decline we may see. The housing market is predicted to remain a buyer’s market throughout 2023 – something we haven’t seen in quite some time. 

    Homebuyers now have the upper hand when it comes to negotiating prices as well as their terms and conditions. This is primarily because the market will continue to see less buying competition due to higher interest rates and further talks of a recession looming. 

    2024 is forecasted to see rates stabilize once again, with predictions that we will begin to see the housing market rebound by late 2024. TD is projecting that Canada’s housing market will strongly rebound in 2024, with home sales predicted to jump by more than 19% and prices to increase by 6%. 

    Inflation should be contained by this point, with the BoC moving to decrease rates as the economy begins to recover from the weak markets of 2023. We are predicted to see much stronger sales activity – more competition and a return to the seller’s market to which we have become accustomed.

    Average Home Sale Price by Major City

    Nationwide home sales in January 2023 was down a collective 18.3% compared to January 2022. Canada’s home sales are currently at a 14-year low – driven primarily by the decreases seen in the Ontario and BC markets. The below chart shows the average sales price and percentage drop in some of Canada’s major cities.

    City Average Sale Price January 2023 Change %
    Toronto $1,078,900 -14.2%
    Hamilton $809,800 -20%
    London $568,300 -22.2%
    Ottawa $603,900 -10.7%
    Montreal $490,000 -5.5%
    Winnipeg $323,600 -8.5%
    Edmonton $362,200 -3.6%
    Calgary $509,900 6.1%
    Vancouver $1,111,400 -6.6%
    Regina $312,200 -1.0%
    Saint John $268,400 5.4%
    Halifax $490,700 5.4%
    St. John’s $316,300 5.4%
    [Average sales prices Canada January 2023. Source, CREA National Price Map]

    Who’s buying Canada real estate?

    Investors account for nearly 20% of all purchases in Canada. Though it’s hard to say if this investor activity will continue into 2023-2024. As of January 1st, 2023, a new Canadian law was introduced restricting foreign investors from purchasing residential properties as investments for two years. This new law was passed as a response to the significant increases in Canadian home prices – partially blamed on foreign buyers who have purchased properties in many Canadian cities as investments – decreasing the supply of homes for Canadian buyers.

    Millennials (1981-1996) are currently the dominant demographic in today’s housing market, mainly in part due to the size of this generation. Baby Boomers (1946-1964) often compete with millennials for similar-sized homes accounting for about 29% of buyers. Gen X (1965-1980) accounts for 22% of buyers, most looking to upsize their homes. The Silent Generation (1928-1945) accounts for 4% of home purchases, while Gen Z (1997-2012) represents just 2% of buyers.

    Canada Housing Market Outlook in 2023

    With significantly higher borrowing costs for most of 2023, it is predicted that the housing market will remain a buyer’s market, with homebuyers having the upper hand compared to previous years. This is partly due to many buyers being priced out of the market – lowering the competition of multiple offers. It will likely remain challenging for many first-time buyers to enter the market this year until mortgage rates are lower. Despite these higher mortgage rates, there continues to be a shortage of homes on the market as sellers hold out for a return to higher prices and more buyer competition

    The Impacts of Inflation on the Canadian Housing Market

    As of January 2023, Canada’s inflation rate was 5.9% which is still much higher than where the Bank of Canada (BoC) would like to see – though it does appear to be decreasing. Interest rate increases are, by design, used to discourage spending and borrowing, which allows the economy to slow down. The central bank may need to increase interest rates further to bring inflation down and reach its 2-3% inflation target. 

    However, Canada’s economy has not realized the full effects of the BoC rate increases just yet. Inflation is typically a lagging factor – usually by up to a year before we start to see how past rate increases will affect the economy. We will likely see this around the mid to end of March as the first increases began in April 2022. A slowing economy should drop inflation rates – before the BoC starts to decrease the Key Policy Rate, predicted to happen by early 2024.


    Is the Canada housing market going to crash?

    Over the years, there has been much speculation that Canada’s real estate market is in a bubble that could burst at any time. However, the consensus is mixed if there is potential for a housing market crash in the future. Some predict prices will dip but stay relatively stable; others predict that prices will continue to fall further, causing the housing market to crash – though it seems unlikely.

    While no one can accurately predict the future, prospective homebuyers should keep an eye on market indicators such as employment trends and the overall economic conditions to best prepare for any sudden changes to the housing market.

    Will Canada housing prices increase in 2023?

    Despite all the economic uncertainty and market volatility, housing prices will likely reduce slightly or remain stable over the majority of 2023 as interest rates stay elevated. Depending on market influences, we may begin to see prices recover and increase toward the end of 2023. 

    How do I get approved for a mortgage in Canada?

    Getting approved for a mortgage in Canada begins with assessing your financial situation. You can do this by answering a few questions. 

    • Do you have a down payment ready? (Between 5-20% of the purchase price)
    • Do you meet the income requirements? (A debt-to-income ratio of 39% or less) 
    • Is your credit score high enough? (typically 680 or higher)

    Wrapping it all up 

    As we look ahead to the rest of 2023, it’s important to note that the housing market is complex and influenced by many factors, such as interest rates, government regulations, and home prices. It’s hard to predict where rates and real estate prices will trend for the rest of 2023 and into 2024. 

    If you’re in the market and ready to purchase, keeping an eye on the news around market indicators and rate changes can help you better understand Canada’s economic outlook and time the market right.