Canadian Real Estate Prices To Fall Lower, Worst Case Is A Return To 2014 Values: Oxford Econ

Canadian real estate prices are still falling, and a prominent research firm sees further declines. Oxford Economics (Ox Econ) updated its housing outlook for Canada today, with a key insight being home prices are still projected to fall further. They say Canada is only about half through the correction—if things don’t break. If things get really bad, the firm warns that home prices can be cut in half, and fall back to 2014 levels.

Canadian Real Estate Prices Are Only Halfway To The Bottom

Canadian real estate prices are falling, and expected to continue doing so in the near-term. The firm’s baseline scenario forecast sees home prices falling 30% in total, from peak-to-trough. That leaves us just under halfway to the target, with another 17% in value to go. If this occurs, housing would just touch the top of the affordability range, though they warn Toronto and Vancouver would still be unattainable to most of the population. 

Obviously, home prices won’t fall right across the country by the same level. They expect home prices to fall sharpest in metros that saw the highest price gains, and biggest erosion of affordability. That means places like Hamilton (-34%) and Kitchener-Cambridge-Waterloo (-33.6%) are expected to see the sharpest drops. Meanwhile, markets with more modest movements like Regina (-10.7%), and Calgary (-11.8%) will see more tempered reductions.  

Home Prices To Make A Steep Decline, Even With Good News

A baseline scenario is the most probable, but proper forecasts include multiple scenarios. The scenarios model in different circumstances that influence the final result. If things like gross domestic product (GDP) growth are better than forecast, so will the outcome for home prices, and vice versa. 

The “moderate upside” scenario is the firm’s view of what happens without a recession. Inflation subsides very quickly, real incomes get a boost, and GDP rises 0.4% in 2023. In this scenario, home prices fall 27% from peak-to-trough. Yes, home prices still fall—since they’re already falling, and adjusting to the lack of affordability. Humans tend to move to opportunity, and unstable shelter is unlikely to continue to attract people.  

Canadian Home Prices Can Fall Back To 2014-Levels In A Worst Case

In a “moderate downside” scenario, a decline in home prices extends further into the economy. Household wealth and consumer confidence suffers a temporary setback, and GDP contracts 3.3% in 2023. In this scenario, home prices fall 34% from peak-to-trough. Much worse economic conditions, but home prices don’t see a big drop with that kind of fallout. 

The worst scenario is the “severe downside,” an extreme tail risk event that involves a shock to the financial system. In this event, GDP contracts 9.9% from peak-to-trough, typically over a period of time instead of just one year. Persistent lower output and capital accumulation occurs, with a severe shock to the credit supply. In this scenario, house prices collapse 48% and fall back to 2014 levels.  

In case you didn’t notice, all forecast outcomes involve a double digit drop to home prices. That may surprise at first, but shouldn’t be much of a surprise given how much prices rose recently. This acute shock to affordability makes housing unaffordable to most of the population, which never lasts too long. When high home prices price young adults out of a city, they move to places with greater opportunities. That will eventually lead to a prolonged downturn, as people seek greater opportunity elsewhere. 



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  • Daniel Ko 1 year ago

    I understand tail risk requires multiple failures, but that’s where prices need to go for Canada to have any sort of future. Right now us immigrants moved here to pay taxes to support a system we can barely use.

    I don’t even know anyone with a permanent doctor, it’s all walk in clinics.

    • John 1 year ago

      Good. This is ridiculous… The cost of everything is tied to how much rent everyone has to pay…and we aren’t creating the types of jobs in Canada to support the fantasies of wealthy real estate hoarders and greedy investors.

      If your employees can’t afford to put a roof over their head, don’t expect that importing cheap labour will fix this issue. Encouraging foreigners to invest in our real estate market at this point only invites more of the same greedy people who created this problem in the first place.

      This has to stop, and property values need to crater, regardless of the impact on those who made ridiculous sums off of this unrealistic and overheated market. It’s literally killing Canadians and putting people on the street.

      • Stephen 1 year ago

        I agree wholeheartedly with John.

      • Russ Lemke 1 year ago

        You are absolutely right. It’s sad to say but a huge correction is on its way and is needed

      • Brent J Eichler 1 year ago

        Home prices will fall, but I doubt rent will fall much. Rent prices are sticky, and there is a lot of demand and not much supply in the places people want to live. This is my humble opnion and I could be wrong.

    • Frederick Pabst 1 year ago

      Very true, but new immigrants know this going in. There is no more “new frontier”, most places are established, so it’s hard to get ahead for both the new citizens and old alike (excluding the 1%, but that’s everywhere). Canada and the entire globe is going back to feudal way with serfs, where everything is a subscription service and you own nothing…

  • Bruno 1 year ago

    People from outside of Canada like this firm don’t understand Canada. It’s not like America, you can’t just put money in the stock market. All we have is housing, so it can’t take such a sharp drop like other countries.

    • Trader Jim 1 year ago

      Isn’t this the argument for why home prices can’t rise forever? Everyone can’t just move to work for a big bank or government, and then buy a house to ponzi to the next person.

      The diverted funds come away from real growth.

    • Average Man 1 year ago

      … why can’t you put money in the stock market? They have Robin Hood, we have Wealth Simple. You can absolutely put money in the stock market my guy. You can even put it in their stock market if that feels better to you.

      • Woolsock 1 year ago

        Exactly! It’s easy to invest in Canada, you even get a bit of a tax credit on the dividends to encourage you to do so (mind you, you don’t pay ANY taxes on capital gains from real estate so…). And if you don’t like the risk, there are good, simple ways to hedge it. If you don’t think RE has the same levels of risk, well, floods, forest fire season, ice storms, tornadoes, crazy condo boards and special assessments would all like to have a word. One facet of this problem is that there is a near pathological belief in RE in Canada that needs to be slowly broken for us to move on. And let’s stop making rock stars out of realtors. They’re just sales people, they don’t make or invent anything.

        • Samuel Schwisberg 1 year ago

          No capital gains tax on real estate only if it’s your principal residence, to clarify.

    • Cory 1 year ago

      I’m not sure I understand. “You can’t put money in the stock market” whow says? As a Canadian investor, I put a lot of money into the stock market! And your statement that Canadian housing can’t take such a sharp drop… It can and it has, and will need to drop further to bring any sort of affordability to housing. Are you suggesting Canadian housing is too big to fail?

    • Yoroshiku 1 year ago

      Canada’s unsustainable upward climb in housing prices reached bubble territory years ago.

      Millions of Canadians believe Canadian real estate is a ‘can’t lose’ thing, so they kept buying and flipping (or renting). People have plowed billions into real estate because they believe they will make tons of dough by doing it. It’s Canada’s other stock market.

      BOC has contributed to the commodification of housing with years of artificially low interest rates. It will slash interest rates to get it going again as quickly as it can.

      Bubbles are unsustainable, ultimately. Disconnected from reality.

  • Ravi Bhindi 1 year ago

    LOL. Let’s revisit this scary price drop in 2027 in this same article’s comments. You guys get a gold medal for excellently coming up with the scariest and most fearful titles: hats off, guys.

    • Timmy O'Toole 1 year ago

      Aren’t you the guy who was saying Canada can’t raise interest rates?

    • AJ 1 year ago

      so were you the smart guy who saw the double digit rises every year? Tell me that if you did

    • Daniel Pelyk 1 year ago

      A quick Google search shows that you’re a realtor. Please allow us not to take your comments seriously as you might not be the most impartial person in here. I understand that things have taken a turn for the worst for “you guys”. Now you need to cope.

  • Ray 1 year ago

    Of course it’s going to be across the board. It was across the board when prices rose so why not on the way down.

    • Marc 1 year ago

      Wasn’t really. The Prairies and parts of Atlantic Canada outside of Nova Scotia didn’t see all that much growth, which is kind of a shocker considering easy credit couldn’t move the needle in some of these places.

  • Ezra 1 year ago

    If you don’t believe a price drop like this can’t happen you must be young. It’s happened in Canada in the 90s. It’s possible.

    • Mark 1 year ago

      Exactly. Lots of folks (especially younger ones with less memory of real history) don’t WANT to believe it is possible. It not only is possible, it actually previously happened during my adult lifetime. It’s the same people who a year ago said “real estate prices can’t go down, they only go up.” BOOM. It happened, prices have been declining month over month for the last year. Time to remove heads from the hole in the ground and look around,

  • Jonny B. 1 year ago

    It did happen in the 90s during a pretty severe recession, IIRC.

  • Kloop 1 year ago

    Is there a link to the actual research report from Oxford?

    • Lauren Maddox 1 year ago

      Oxford Economics doesn’t post them since they sell the research, but in my experience if you email them they’ll send you a copy of a report. You probably can’t do it every month, but every once in a while I’m sure they don’t mind.

  • Sam 1 year ago

    This is proptional to …. employment rate.
    All eyes on this number, the next 6 prints will tell..

  • dave frazer 1 year ago

    Forcasts like this may shock people into selling before real estate drifts lower. Expect a large drop May or June this yeaer when the spring market
    does not shift too many houses. From an investment point of view a house value should be approximately 10 times rental income. In Vancouver and Toronto a standard house with a suite rents for a Max of $5000/ month or $ 60,000/ yr so an investment value of $600,000. Either rents have to rise or house prices have to fall. Very rough figures but you can see the problem.

  • Allen B 1 year ago

    Almost one million people move to Canada in 2022, about 430,000 new permanent residents, and between temporary foreign workers and international students, another 400,000 to 500,000. All require housing and the Trudeau Liberals are set to increase the number of new arrivals in 20223.

    Rentals have become completely unaffordable, tenants who had no way of purchasing a property before the current slowdown are now actually finding it even harder as a bigger percentage of their income is devoted to rent and despite price drops, the increase in interest rates had reduced what little purchasing power they had, so they are seeing that elusive first home purchase moving even further away.
    Without a temporary slowdown of new arrivals, home prices will never normalise enough for the average working Canadian to afford one.

    • MC 1 year ago

      Do they price homes in the number of immigrants up in Canada, or do you use money like the rest of the world?

  • Peter Deason 1 year ago

    Perfectly timed , many silver hair are getting ready to downsize and retire after years of hard work.. most relied on some type of home equity to downsize and spread some to their kids. Agreed the upward price trend had to correct. Retirement now will be delayed for many,the gov likes that, they don’t have to pay cpp. You neglected to mention the wage issue . Wages have not kept up with profits taken on the backs of workers. And shame on BOC for assuring buyers interest rates wouldn’t rise anytime soon, then the most aggressive hikes in history leaves many under water. Remember,there is a housing shortage in Canada and fear mongering to scare ppl into selling to those at the ready with deep pockets. This country is ruined from top to bottom.

  • John letonja 1 year ago

    The real estate market can’t tell the home seller how much your home is worth to you You can sell your home for any price you want we all know the federal government is raising interest rates will cause recession but that doesn’t mean you home is worthless the government should tax the banks so we can claim our mortgage on our tax return like the United States are doing this well help home owners live in their home hold if you can on selling your home unless you have to but get the best price for your home and don’t under sell yourself be smart and be wise

    • Peter Deason 1 year ago

      The Gov in Canada does tax the banks profits

    • Frederick Pabst 1 year ago

      Putting mortgage on your tax return for a deduction, like in the US, would be like adding gas on a fire. People would take on more debt. US is different, they have 30-year mortgage and after a certain amount, they pay taxable gains when they sell their home. Plus, in many cases, way higher property tax.

    • Mark 1 year ago

      Almost all of your assertions here are patently incorrect. For example, the value of an asset is completely determined by what the market is willing to bear. You can set any random price on a property and hope/pray, but unless a buyer (from “the market”) is willing to pay it, you are s*** out of luck.

      Also, try using punctuation, so you seem like less of crazy person.

  • Giovanni 1 year ago

    Canada’s market is different than US or every where
    Nova Scotia or Alberta are cheapest because nobody’s wants to live there
    Toronto has a strong labour market so people goes where jobs are
    Now they going to build 1mm homes…LOL With gas, labour and building materials so high the new homes prices can’t be low
    Immigration still coming , builders will stop …till they get profit and….houses prices goes up again Its simple offer-demand
    No enough houses ….

    • Oh Canada 1 year ago

      Toronto incomes are actually lower at the median than Nova Scotia, which is why they have the fastest growing province and Toronto’s population is growing as immigration dumping ground from the Fed.

      • Aj 1 year ago

        Wrong. Median Toronto household income is approx. 109,000. Nova Scotia is approx. 90,000. About 20,000 more. Where do you get dtat from? Just make it up? Assume?

        • Jamie Price 1 year ago

          That’s the average for Toronto, not the median.

      • Frederick Pabst 1 year ago

        I truly hope you are not an economist or data analyst…. That is not correct reasoning of why people are moving there…

    • steve 1 year ago

      Those who bet on low interest rate in 2022 had the same tendency. You will see, the Canadian housing market will suffer in the second half of this year. No empire will last forever. You will see it very soon.

    • Aj 1 year ago

      Alberta is the cheapest? Haha.

  • Russ 1 year ago

    Maybe our liberal government can give some of the taxpayers money back to first time home buyers instead of giving it all to the indians

  • Ravi 1 year ago

    I think it’s a good think that house prices are dropping it give affordability to everyone and new buyers…

  • Aj 1 year ago

    Wrong. Median Toronto household income is approx. 109,000. Nova Scotia is approx. 90,000. About 20,000 more. Where do you get dtat from? Just make it up? Assume?

    • Jamie Price 1 year ago

      that’s the average for Toronto, not median. They’re two different things, but in any case one is much closer to being able to service the mortgage credit required for a typical home than the other.

  • SS 1 year ago

    If prices for housing and rents do not drop sharply there is basically nothing to do in Canada. Thankfully we have 4 bedroom house elsewhere hence have options. The problem is liberal approach to economy. These guys both liberals and conservatives believe in gods of the markets . They believe that they only has to play with interest rates and some laws by laws without working hard. Anyone who believes that this housing problem can be solved with building more private houses is delusional. Look at Toronto core. Full of old and ugly looking houses which take a lot of place and house little people. That’s very inefficient way of using space. Condos is a nother ponzi scheme making housing affordable.

    • dave frazer 1 year ago

      I agree. I do not know why anyone would buy a condo. They are not an investment more of a liability. Condo fees seem to be rising far faster than inflation. Its like having 2 mortgages to pay, But only one you can pay off. the other keeps increasing. Condo fee increases will eventually make condos almost unsellable and turn them into a depreciating asset.

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