Canadian real estate market anticipates a 3.5% decline in home resales by the coming year, according to the prediction.
Canada's Housing Market Faces Continued Decline in 2022
Canada's housing market is bracing for a challenging year ahead, with a continued decline in home resales expected throughout 2022. The anticipated downturn is primarily due to a combination of factors, including rising interest rates, a fragile labour market, reduced immigration targets, and affordability challenges.
The Bank of Canada's aggressive interest rate hikes, starting mid-2022, have made mortgages less affordable for many buyers. As a result, higher interest rates are expected to remain elevated, putting pressure on resale activity.
The labour market in Canada has also weakened, reducing consumer confidence and purchasing power. This, in turn, has decreased buyer demand. The slowdown in population growth, due to government curbs on immigration, has further diminished housing demand in key urban centers.
Market psychology has shifted, with buyers increasingly expecting prices to fall further, causing them to delay purchasing. This hesitation is compounded by supply-demand imbalances, particularly in Ontario and British Columbia, where an oversupply of condos and increasing rental availability have led to falling condo prices and cancellations of projects.
Regional variations exist, however. While some regions, like Quebec and the Prairies, see modest price gains due to supply constraints and migration, Ontario and BC face pronounced challenges, especially in condos, which spill over into other housing segments.
The majority of the decline in home resales has already occurred in the first six months of the year. Ontario and B.C. will see the steepest drop in home prices, largely due to high inventory and strong competition among sellers. Approximately 467,100 old homes are expected to be resold in Canada this year, a decrease of 3.5% compared to last year.
Despite these challenges, the report predicts a gradual recovery in the second half of 2025, setting the stage for stronger demand in 2026. The resale market in Canada is predicted to see a 7.9% rebound in 2026, with approximately 504,100 homes resold. However, even in 2026, the number of homes resold will still be below the pre-pandemic five-year average of 511,000 homes resold in a year.
It's important to note that the home resale data measures the number of existing homes being resold to new owners, not including the sale of newly built homes. The report suggests signs of a housing market recovery are already appearing, with prospective buyers shedding their economic fears and interest rates falling.
The decline in Canada's housing market is not solely attributed to the trade war with the U.S. President Donald Trump. While there is an expected modest increase of 0.7% in home prices, prices will continue to fall in the second half of the year and well into 2026. Ontario and British Columbia are expected to bear the brunt of the impact from a cold housing market.
In conclusion, while the housing market in Canada is expected to continue experiencing a decline in home resales for the rest of 2022, signs of a recovery are already appearing. The balance is expected to continue shifting in favour of buyers, particularly in Ontario and B.C., and a gradual recovery is predicted for the second half of 2025, setting the stage for stronger demand in 2026.
**References:** [1] Bank of Canada - Interest Rates [2] Statistics Canada - Labour Market [3] Immigration, Refugees and Citizenship Canada - Immigration Levels [4] Canada Mortgage and Housing Corporation - Housing Market Outlook [5] Toronto Real Estate Board - Market Reports
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