Canadian Real Estate Correction Not Over, Rising Sales Temporary: Oxford Econ 

Researchers Destroy The Narrative That Greater Toronto Is Running Out of Land

Canadian real estate is heating up, after a brief correction. Both prices and sales are up around most of the country—some markets rising by tens of thousands in May. Don’t expect it to last, warns a top economist. Oxford Economics warned clients they expect this to be a temporary boost, and the pullback for existing home prices is less than halfway to their forecast bottom.

The Canadian Real Estate Correction Hits Pause, and Sees Exuberance Return

Canada’s real estate markets have picked up recently. Seasonally adjusted existing home sales rose 5.1% in May, when compared to a month before. Unadjusted sales were 1.4% higher than the same time last year, despite buyers dealing with much higher interest rates. 

Rising sales were generally seen across Canada, with the volume rising in 70% of markets. However, it’s worth emphasizing that existing home sales remain below the 10-year average. 

The market resurgence might be a passing trend, according to some economists. “Canada’s resale housing market revival continued in May as home sales and prices rose once again last month,” says Tony Stillo, director of Canada Economics. 

Though he adds, “However, we believe the spring housing upswing will fade this summer as interest rates rise further and expect a 10% drop in home prices by early next year.” 

The Canadian Real Estate Correction Is Not Over, Warns A Top Economist

A brief dip in mortgage rates sent exuberant buyers panicking to get into the market. That’s helped send home prices 2.1`% higher in just one month, leaving them 12% below the record high in February 2022. For context, despite new housing supplies rising significantly faster than population growth, prices jumped 62% from December 2019 to peak. 

Not much of a correction considering the increase, right? Stillo and his team don’t see this as the end of the correction, but just a brief pause before it continues. 

“…we don’t think Canada’s house price correction is over,” Stillo bluntly argues. “There may be a flurry of sales before the Bank of Canada next rate decision in July. However, as interest rates move higher and Canada slips into recession, we expect weaker housing demand and higher listings will cause home prices to resume falling, resulting in an overall 20-25% peak-to-trough decline from the February 2022 high.” 



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  • Dennis_K 11 months ago

    Looking at the National Bank of Canada Housing Affordability Monitor for Q1 (March 7, 2023), even with a 20-25% peak-to-trough price drop, sadly it still would price the median home in most urban areas in Canada above what a median household income could support (excepting Edmonton, Quebec City and Winnipeg). That’s looking at a 25% drop in ‘Qualifying Income’, relative to each area’s ‘Median Income’.

    To me, at least a 40-50% price drop is needed to restore general housing affordability, relative to incomes.

    • ChefR3D 11 months ago

      25% drop, then flat for years until the income and/or rates catch up is a likely outcome.

    • Ike 11 months ago

      Housing prices drop when buyer affordability drops, mainly due to rising interest rate. It’s really tough for housing price to drop by 50% while keeping the affordability constant unless everyone went on a buyer’s strike.

      That won’t happen, which means what buyer x can afford now won’t be too different from what buyer x can afford after the proverbial popping of the bubble due to much higher mortgage rates.

  • Richard Zywotkiewicz 11 months ago

    Can I ever get tired of people calling GTA and B.C. markets Canada? Calgary has seen increases steady over the last three years and at least a twelve percent increase Since last year. There has been no price drop and there are contant bidding wars to this day.

  • Prairieboy43 11 months ago

    No change in Edmonton area since 2007.

  • Andrew Baldwin 11 months ago

    Stillo is quoted as saying “There may be a flurry of sales before the Bank of Canada [should be Canada’s] next rate decision in July.” I hope he is wrong about the Bank of Canada raising the overnight rate again in July. In any case, I expect that he is right about home prices starting to drop again. In some markets, like Ottawa, where I live, house prices have never really stopped dropping. The Teranet National Bank HPI has registered monthly declines in the seasonally adjusted series for Ottawa in every month from June 2022 forward. Richard Zywotkiewicz is right that prices are rising in Alberta, and will likely continue to do so, but for the country in general, price declines are likely in order. That would, in fact, be a very good thing for young Canadians trying to get into the housing market.

  • Dave P. 11 months ago

    Everyone seems to forget the x factor which is the coming recession. All this up and down talk is useless. Wait for the recession to hit and when people start losing their jobs by the thousands, THEN you’ll see the real correction within the following 6-12 months. Until then it’s like watching the stock market.

  • Yoroshiku 11 months ago

    My realtor neighbour told me that a bunch of pre-approved buyers are frantically house shopping in the GTA. They’re trying to buy homes at the lower rate to save a few bucks on mortgage rates before those go up.

  • Angad Shukla 11 months ago

    Ban investment properties. Simple and easy solution. Of all 100% investment property owners, give ultimatum to first 10% who bought investment property the earliest and go on to the next 10% and so on. (Order in accordance to the length of time owner had the investment property) There are 4.8 million homes in Canada which are owned by investors.

    Houses are not your commodity, it’s a basic necessity. Go invest in industries.

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