Home prices will drop steeply this year, forecasts TD economist

A new report from TD comes with some good news for aspiring homeowners — this could be your year.

Home prices will bottom early this year, according to TD economist Rishi Sondhi, who studied the Canadian housing market and its patterns through the years.

In his observations, Sondhi factors in the seven interest rate hikes from the Bank of Canada last year, which largely made homes more unaffordable.

Even though one more small rate hike is expected this month, we will still see a big drop in prices, making Canada more of a buyer’s market.

Though home prices went up for the first half of 2022 and fell swiftly during the second half around Canada, now, we can expect to see prices lower than we witnessed at any point last year.

All that said, actual home sales will not see an uptick. Sondhi says sales will remain low “thanks to the poorest affordability backdrop since the late ’80s/early ’90s.”

Even though a peak-to-trough decline of up to 20% is expected, this year is shaping to mark the weakest sales year since 2001.

British Columbia

BC saw the biggest decline in home sales last year at a dismal -35.3%. In 2023, we can expect some growth in that section (-22.8%).

This will happen due to home prices dropping by 15.1% in 2023. By 2024, prices are expected to hit a mild growth rate of 2.1%.

Ontario

Among all the provinces studied, Ontario saw the second-largest drop in home sales last year at -32.7%. This year, home sales are forecast to double at -15.5%, as average home prices drop by 11.4%.

Compared to this year, 2024 looks even brighter with a major leap in home sales (24.4%). Prices will go up by 1.7% as well, however.

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Quebec

Last year, Quebec saw a 20% decline in home sales. While average home prices in Quebec are lower compared to BC or Ontario, they did see a bigger general increase last year, going up by 8.6%.

In 2023, home prices will dip by 7.4%, giving way to increased sales as mortgage interest rates stabilize, steering away from inflationary measures.

Alberta

The lowest dip in home sales across Canada in 2022 was seen in Alberta — a mere 1.5% fewer sales were observed. But this year, you can expect a huge plunge with 20.9% fewer home sales than the last.

Homes and rent have both been more affordable in Alberta than in some other major provinces, but a cool 5.6% dip in home prices is coming this year. In 2024, home prices will increase again, but will be nowhere as hefty as they have been this past year.

National summary

Some of the steepest price drops will happen in the housing markets of the Atlantic region, BC, and Ontario, which have been hot markets thus far.

Comparatively, the Prairies and Newfoundland and Labrador will all see a less pronounced decline, due to housing already being comparatively affordable there.

By 2024, Sondhi predicts, inflation will be contained. That’s when actual home sales might start seeing a rise, to match the drop in home prices.