The current state of the Canadian Real Estate market
The current state of the Canadian Real Estate market
The Canadian real estate market has been experiencing unprecedented growth in recent years, with prices rising rapidly and demand remaining high. However, with the ongoing effects of the COVID-19 pandemic and other economic factors, there are questions about the sustainability of this growth and what the future holds for Canadian real estate. In this blog, we will take a closer look at the current state of the Canadian real estate market in 2023.
Overall Market Trends
In 2023, the Canadian real estate market continues to be characterized by high demand and low supply, which has led to significant price increases across the country. The market remains competitive, with many properties receiving multiple offers and selling above asking price. In addition, the pandemic has changed the way people think about their homes, with more Canadians prioritizing larger living spaces and access to outdoor areas.
Despite these trends, there are some indications that the Canadian real estate market may be starting to slow down. The Bank of Canada has raised interest rates several times in the past year, which has led to higher mortgage rates and decreased affordability for some buyers. In addition, new mortgage stress test rules have made it more difficult for some Canadians to qualify for loans.
Market Conditions and Housing Affordability
According to the Canadian Real Estate Association (CREA), national home sales rose by 1.5% in January 2023 compared to the previous month, marking the second consecutive month of gains. However, sales activity remains below pre-pandemic levels, with a 13.4% decrease compared to January 2022.
The national average home price rose by 18.5% year-over-year in January 2023 to $763,022, driven primarily by high demand and low supply. However, it’s worth noting that the year-over-year growth rate has slowed compared to the record-setting pace seen in 2021, when the national average home price increased by 22.8% compared to 2020.
Housing affordability remains a concern for many Canadians, particularly first-time homebuyers. The latest RBC Housing Affordability Measure, which tracks the proportion of household income needed to cover the costs of owning a home, shows that housing affordability has deteriorated in most of Canada’s major markets. For example, in Toronto, the proportion of income needed to cover housing costs rose to 84.8% for a detached bungalow in the fourth quarter of 2022, up from 74.9% a year earlier.
Regional Variations in the Canadian Real Estate Market
As mentioned earlier, the Canadian real estate market is characterized by significant regional variations. Here are some examples of how different regions are faring in 2023:
Toronto:
Despite some signs of cooling in the market, Toronto remains one of the most expensive real estate markets in Canada. According to the Toronto Regional Real Estate Board (TRREB), the average home price in the Greater Toronto Area (GTA) was $1,087,987 in January 2023, up by 17.8% compared to January 2022.
Vancouver:
Similarly, Vancouver remains a hot real estate market, with high demand and low supply driving up prices. The Real Estate Board of Greater Vancouver reports that the composite benchmark price for all residential properties in Metro Vancouver was $1,390,800 in January 2023, up by 18.4% compared to January 2022.
Halifax:
As mentioned earlier, the Halifax real estate market has been experiencing significant growth in recent years. According to the Halifax-based Nova Scotia Association of Realtors, the average price of a residential property in Nova Scotia was $432,815 in January 2023, up by 31.7% compared to January 2022.
Alberta:
The Alberta real estate market is rebounding after a period of decline, with rising oil prices and increased migration to the province driving demand. The Alberta Real Estate Association reports that the average residential price in Alberta was $406,708 in January 2023, up by 11.6% compared to January 2022.
Impact of the COVID-19 Pandemic on the Canadian Real Estate Market
As we’ve already touched upon, the COVID-19 pandemic has had a significant impact on the Canadian real estate market. In addition to the desire for larger living spaces and access to outdoor areas, the pandemic has also led to increased interest in smaller towns and rural areas as Canadians rethink their work and lifestyle priorities.
According to a recent report by the real estate company RE/MAX, many Canadians are considering moving to smaller towns and rural areas, with more affordable housing and access to nature among the top reasons. In fact, the report predicts that the demand for rural properties will remain strong in 2023, with prices expected to rise by 5% to 10%.
Looking Ahead
As we look ahead to the future of the Canadian real estate market, there are a number of factors that could impact its growth and stability. The Bank of Canada’s interest rate decisions will continue to play a major role in determining the affordability of mortgages, while government policies around immigration and housing development could impact supply and demand.
In addition, there are some concerns about the sustainability of the current growth in the real estate market. Some experts have pointed to the high levels of household debt in Canada as a potential risk, while others have noted that the market may be overvalued compared to historical norms.
Despite these uncertainties, the Canadian real estate market is likely to remain strong in the coming years. With its stable political environment, high quality of life, and diverse economy, Canada remains an attractive place to live and invest. However, it will be important for buyers, sellers, and investors to stay informed about market trends and to make informed decisions based on their own circumstances and goals.
Overall, the Canadian real estate market in 2023 remains dynamic and constantly evolving, with opportunities and challenges for both buyers and sellers. It will be interesting to see how the market continues to evolve in the years ahead.