Canadian Real estate has shown a downward trough in home sales and average prices across the country after the drastic peak seen in pandemic years 2020, 2021 and the nation wide strengthening of monetary policy since March 2022.Ontario, being one of the most economically vulnerable provinces of the real estate market, has experienced some of the greatest price corrections, with Bramptom city seeing the highest decrease of 27% in year over year house sales in January 2023.

Ontario Real Estate trends recorded by CREA as of February 2023:

• Significant drop of 43.5% in house sales with only 10,891 units sold
• A 18.9% decline in national average price standing at $662,437
• total home sales of 18,627 units on a year to date basis accounted for 41.5% decline in unit sales recorded in february 2022
• 19,143 new residential listings which formed the lowest number of new listings recorded in the month of february 2023 in over 35 years
• GTA’s average home price dropped by 16% year over year and accounted for 15% of all house sales in Canada.

Predictions 2023 for Ontario Real Estate Market made by expert economists

As claimed by the TD chief economist, Beata Caranci, the Ontario real estate market has experienced one of the steepest declines in house sales. In addition, other experts have anticipated that the erosion in the real estate market will continue in the second quarter of 2023 and then bounce back at year end extending into 2024 once higher interest rates peak to cause marketplace correction.

According to Desjardin’s economic report, house prices in Ontario have sharply declined after a dramatic boost in the pandemic years 2020 and 2021 and are expected to remain constant going forward. The Desjardin report attributed the steep decrease in house prices to reduced affordability of house seekers.

The economists at TD economics have affirmed that home sales in the Ontario real estate market are expected to decline at 15.5 per cent in 2023 and then hike at 24.4 percent in 2024. Whilst, home prices are anticipated to depreciate more than 11 per cent in 2023 and rise by 1.7 percent in 2024.

Robert Hogue of RBC economics expects prices to keep falling until a bottom next spring. His forecast calls for a national benchmark price to drop 14% from (quarterly) peak to trough.

Expected 12 month price estimate for Ontario Real Estate housing market:

The Ontario Real Estate trends for 2023 show a significant decline across house sales and house prices. However, the trend might just be an after effect of the following factors affecting the Ontario Real Estate Market:

Factors affecting Ontario Real Estate Market

Population Growth and Immigration targets

Population growth in Canada has caught pace after the 2020 pandemic. Along with Canada’s population surge, Canadians seem reluctant to accept immigrants in a fairly weak job market and the impending recession wave.

Disparity between Home Prices and Average Household Income

With recession rapidly sweeping across the world, the average household income in Canadian homes fails to meet the demand of house prices. The disparity between income to house affordability seems unaffected despite the downward trend in house prices as of 2023. To make it simpler, house prices become unaffordable once they surpass 40% of the total household income.

Rising inflation

Inflation seems to gnaw on the savings of Canadians as necessities become more inaccessible with paychecks remaining unchanged.

“On average, regardless of a household’s demographic or economic characteristic, gains in household wealth acquired over the previous year have been erased,” Statistics Canada

With the ever increasing gap between prices and paychecks, it is feared that savings might dry up faster than expected and Canadians might have to seek debts to afford necessities.

Conclusion

The gap between affordability and house prices in the Ontario region widened more expansively than ever during the pandemic, and caused real estate market erosions. With the downward trend in house prices seen in 2023 exceeding into 2024, economists expect an improvement in the house prices for Ontario Real Estate. However, the reduction may not rebound to pre pandemic ranges by the end of 2024. Other factors such as inflation, income inequalities, higher interest rates and policy making shall continue to significantly affect the real estate marketplace nationwide.