There was a strong real estate start to the year in 2022, but that year was defined by unaffordability, which sparked one of the most remarkable interest rate hikes from the Bank of Canada. Because of this, many sellers and buyers were sidelined and continued to remain as such even while house prices were declining. 

2023 rolls in, bringing new hope for many Canadians to reenter the real estate market, but we have to adjust our expectations. So what can you expect?

While there will be a lot of the same kind of prices from last year, we can see a bit of reprieve on the horizon. 

The Bottoming Out of Prices

The housing markets were in correction mode for most of 2022, and it seems the worst parts of the correction are behind us. But there are still major markets that are seeing a downturn in conditions. But we haven’t seen prices come down in a meaningful way, just yet. We expect to see a gradual month over month decline as we proceed through 2023. But it is likely we will still have to wait years for this large deterioration to be reversed. 

Each market will tell a different story of price depreciation. So properties in smaller markets will see more significant corrections in the average prices. British Columbia will continue to see overstretched affordability. 

The End of the Rate Hike Cycle

The Bank of Canada saw its 7th consecutive interest rates hike in December of 2022. The sad thing is the hike cycle has not done much to bring down inflation. There is another hike on the horizon, set to happen on the 25th of January to the tune of 25 basis points. 

While we don’t expect to see too much improvement in the first half of 2023, buyers will soon be able to make a move on properties that catch their eye without too much competition. 

Effect on Mortgage Carriers

Mortgage carriers find themselves in a tight spot for 2023. If house inflation is 10 times, then mortgage inflation is also 10 times. Individuals with a HELOC or primary-based mortgage product will have difficulties with increases, which escalate their payments. Persons that are mortgage hunting will also be in a tight spot.

Immigration and Housing

The government of Canada plans to welcome over 460,000 permanent residents in 2023 alone. Over the next three years, the government is set to welcome a total of 1.45 million permanent residents. 

This will result in an immigration housing demand that will inject the market with the lacking urgency from 2022. New development costs will lead new and existing Canadians to turn to the rental market, which will further compound the affordability challenges of the sector.