Canadian Real Estate Prices To Fall 30%, Early Stages of Recession Are Here: Ox Econ

The outlook for Canadian real estate, and the economy in general, is looking a little less bright. Oxford Economics warned clients this week, that we’re already seeing the early stages of a recession. Higher rates to cool inflation are pushing home prices much lower and prolonging the downturn. High inflation also means a stimulus windfall is unlikely, since it would be counter-productive to cooling measures.

Canadian Real Estate Prices To Fall 30%, Most Gains To Be Wiped Out

Canadian real estate prices are forecast to fall further, but pandemic-era gains won’t be wiped out—though it will be close. The firm sees prices falling 30% from peak-to-trough, after rising more than 54% since March 2020. For those without a calculator handy, that would leave March buyers with roughly 2.3% compound annual growth rate (CAGR). Not exactly the windfall many believed they were blessed with, especially when soaring inflation is considered. 

Residential investment, the share of gross domestic product (GDP) from new real estate, is also seen falling. The segment dropped 10% from Q1 to Q3 this year, as interest rates increased. The firm sees a further 8% decline in the coming year, which isn’t too hard to see with slowing new construction sales. 

Canada’s Recession Will Be Longer But More Shallow Than Normal

Early signs of a recession have already appeared, and this coming recession is expected to be longer than usual. Falling residential investment and already skeptical businesses are seen limiting their investment in this downturn. The firm is forecasting a 2% decline in real GDP from Q4 2022 to Q3 2023. The impact won’t be equal, as you might have guessed.

“This is slightly longer but shallower than the average recession since 1970,” explained Tony Stillo, director of economics at the firm. “Canada’s highly indebted households and still overvalued housing will likely be hardest hit.” 

Major Stimulus Unlikely & Counterproductive 

Expecting this recession to be a stimulus windfall? Don’t count on it, suggests Stillo. The recession won’t be particularly bad, and pre-planned infrastructure projects will help cushion the downturn. However, high inflation has become a limiting factor.  

“To avoid undermining the Bank of Canada’s efforts to tame inflation, major new fiscal stimulus is unlikely unless the recession is severe,” said Stillo.

18 Comments

COMMENT POLICY:

We encourage you to have a civil discussion. Note that reads "civil," which means don't act like jerks to each other. Still unclear? No name-calling, racism, or hate speech. Seriously, you're adults – act like it.

Any comments that violates these simple rules, will be removed promptly – along with your full comment history. Oh yeah, you'll also lose further commenting privileges. So if your comments disappear, it's not because the illuminati is screening you because they hate the truth, it's because you violated our simple rules.

  • Rick Abrams 2 months ago

    Why would one think that Canada’s housing values would dramatically increase with the following downward population trend?

    The current population of Canada in 2022 is 38,454,327, a 0.78% increase from 2021.
    The population of Canada in 2021 was 38,155,012, a 0.7% increase from 2020.
    The population of Canada in 2020 was 37,888,705, a 0.98% increase from 2019.
    The population of Canada in 2019 was 37,522,584, a 1.32% increase from 2018.

    Birth Rate Is Declining

    The current birth rate for Canada in 2022 is 10.148 births per 1000 people, a 0.74% decline from 2021.
    The birth rate for Canada in 2021 was 10.224 births per 1000 people, a 0.74% decline from 2020.
    The birth rate for Canada in 2020 was 10.300 births per 1000 people, a 0.73% decline from 2019.
    The birth rate for Canada in 2019 was 10.376 births per 1000 people, a 0.73% decline from 2018.

    Why would one expect Canada to have any significant increase in demand for housing? Why would one expect Canadians to want to live in more crowded conditions?

    • Jacky 2 months ago

      Because of the number of people being brought in

    • Khosro 2 months ago

      It takes many years for the newborn babies to enter the housing market but you are ignoring the 500,000 new immigrants per year that the liberals are planning to bring into Canada in the next couple of years.

    • Grim Reaper 2 months ago

      The federal government intends to import 500K immigrants per year for the next 3 years. Where are they all going to live? There is already a housing shortage so that will get worse which will keep residential real estate prices up. Land and construction costs are escalating which will cause residential real estate prices to increase. People need a place to live.

    • Fred 2 months ago

      Immigration. 500K / year over the next 5+ years. Which hasn’t been happening since a little challenge we had, maybe you’ve heard of it. I think one or two people called it COVID.

    • Yoroshiku 2 months ago

      I guess it’s because Immigration, Refugees, Citizenship Canada [IRCC] has announced plans to increase immigration targets significantly over the next couple of years, to address some labor shortages and to keep a solid level of working people to help fund healthcare and other benefits. It’s clear that Canada needs more healthcare workers!

    • Raj kang 2 months ago

      government is brining in 1.5 million immigrants in next 3 years.

  • Oliver 2 months ago

    We running from one crisis to the next. Just throttling down immigration from 500k to 100k a year would resolve the housing crisis. We letting in about 1,600 migrants per day. Don’t tell me this doesn’t put pressure onto the housing market.
    Also, the inflation and high interest is part of the plan from the central banks according to a Bloomberg report in February of 2022. Driving up the fuel prices, especially Diesel, is causing this almost uncontrollable inflation. And they don’t care how much suffering they inflict on the population

  • Rick 2 months ago

    How much higher does anyone with the least bit of commonsense think that prices will keep rising.
    My friends work for builders and they tell me they have sometimes 60 to 70 homes that have closed months ago and are just sitting there unoccupied. It’s either investors or criminals laundering thier money. Regular families can’t afford these homes and secondly they’ll never get Mortgages because they’ll never qualify.
    It’s all hard-core money laundering and the government knows this. Investors are jumping ship because of the higher rates, what are you possibly going to charge a tenant to cover your loan payments.

  • Sachin 2 months ago

    The article has completely ignored one moat critical factor like massive immigration targets for next 3 years ,most of which will clump together in GTA.

  • SH 2 months ago

    30% decline. LOL. Nowhere near enough. ZERO incentive to buy at a 30% discount from current prices.

  • Johnnybeegoode 2 months ago

    Perhaps because of a huge increase in immigration feeding the ongoing gold rush

  • moneyfollower 2 months ago

    nonsense, it’s all about the flow of money from china and india, interest rates have little to do with it.

  • Rob Mo 2 months ago

    Thanks Justin Trudeau for creating all this unprecedented inflation. Now everything is gonna pop and our economy will crash, all because you were a turd. Get Trudeau out!

  • Dan 2 months ago

    Rick Abrams, you are correct, thanks for pointing it out with data to back it up. I always suspected the same, canada’s population has always been 28 million from 1995 until 2022. they just keep replacing those that die or leave voluntarily. What new immigrant comes with 200k for a downpayment? i only see immigrants with tatered and torn clothing barely having enough for a meal. eating bags of rice is becoming a normal “canadian” thing.

  • Ahmer Ali 2 months ago

    Best future good job

  • Singh 2 months ago

    I immigrated to Canada 10 years back, leaving my Specialist doctor job.
    Studied again, got BASc. and MSc. in computer science.
    Unable to buy a house till now.
    Considering leaving this country, it is not what was advertised to me.

  • Blake 2 months ago

    Immigration.

Comments are closed.