Canada home resales will fall 23% in 2022, another 15% in 2023: RBC
![Canada home resales will fall 23% in 2022, another 15% in 2023: RBC](https://dpdajlq3ew794.cloudfront.net/20220818085847/shutterstock_image-2022-08-18T115834.799.jpg?format=auto&width=1920)
Rising interest rates have led to the end of Canada’s pandemic-era housing market boom, and both prices and sales will continue to tumble into 2023.
In a recent housing market update, Robert Hogue, assistant chief economist at RBC, said the “bottom is still a ways away” for Canada’s housing market.
Since the Bank of Canada began raising interest rates in March, national home resales have fallen 31%, and benchmark prices have dropped nearly 6%. Most of Ontario and British Columbia have seen even greater declines.
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With further rate hikes still to come — another 100 basis-point increase is expected by the fall — the bottom is likely many months away.
“The pandemic may not be over but the pandemic-era housing market boom certainly is,” Hogue said.
“With the balance of power having dramatically shifted in their favour, buyers will be in a position to continue extracting price concessions from sellers for some time to come.”
What were once overheating markets in Ontario and British Columbia’s Lower Mainland have turned into the “epicentre of the downturn to date.”
Since the February peak, the biggest declines in the composite MLS Home Price Index (HPI) have been seen in Cambridge (-17%), Kitchener-Waterloo (-16%), Brantford (-14%), London (-14%), and Guelph (-10%).
On a monetary level, the loss in value is “striking,” Hogue said, varying from $95,000 in Guelph to $166,000 in Cambridge. In the Greater Toronto Area, the HPI has fallen 7%, or $89,000, in the last five months.
The Fraser Valley is leading BC’s correction, with the composite benchmark price falling 5.6%, or $65,000, since March. The area has seen more than double Vancouver’s decline.
Cracks are showing in other parts of the country, too, although markets outside Ontario and BC have generally seen a milder correction
In Quebec, activity has been “gradually moderating,” which is leading to lower prices. Over the past two months, both Montreal and Quebec City experienced declines in the composite MLS HPI, which suggests the cities have likely past peak prices.
Prices began to soften several months ago in parts of Alberta, too, although home resales have so far remained above pre-pandemic levels. Hogue sees this as mounting evidence that a “generalized downturn is underway” in Canada.
RBC expects the Bank of Canada’s 100 basis-point interest rate hike on July 13 to be met with an additional 100-point increase over September and October’s rate announcements.
If the former “threw ice-cold water on the market,” the anticipated hikes will no doubt “keep chilling things.”
RBC projects that national home resales will fall 23% this year, and a further 15% in 2023.
“We believe the market will adjust to higher interest rates by early 2023,” Hogue said.
“Any recovery will likely take a few months to tighten demand-supply conditions, placing the bottom for prices around spring time (overall for Canada).”
Canada-wide, benchmark prices are expected to fall approximately 12% from their recent peak. On a provincial level, Ontario and BC could see record peak-to-trough declines above 14%, while Alberta will see less than a 3% drop.