It seems unreal that another year is upon us already. However, here we are, just 19 days from welcoming 2023. What will the coming year look like for the real estate market?
The recent softening of the market may have some people feeling discouraged. Still, there are many reasons to be cautiously optimistic about the year ahead. Let’s take a look at some of the top predictions for 2023.
What We Don’t Expect
Before we get into what we think will happen, let’s talk about one thing we don’t expect. With the sharp interest rate hike in July and the subsequent softening of the real estate market, a sense of fear began to set in. Will the market ever crash again like it did in 2008? While we can’t see that far into the future, no one expects that to happen any time soon.
Even though sales have slowed down, there is too much demand for housing for the market to crash. It isn’t just because the population is growing. In fact, Canada’s new immigration policy nearly assures us that the market will pick up again shortly.
In an uncertain market, it can be difficult to make the decision to buy or sell a home. Here are some of our other resources that can help:
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Immigration Will Affect the Housing Market in 2023
The federal government has recently increased immigration targets, with a goal to bring in 1.45 million permanent residents over the next three years. As a result, we expect approximately 500,000 new immigrants in 2023 alone. Why would the government do this?
You may have noticed “Help Wanted” signs everywhere you go. The Canadian job market has exploded as many people left the workforce during the pandemic, either changing careers or retiring altogether. Currently, there is a shortage of workers across nearly every sector in the country.
Increasing the number of immigrants is one way to fill these badly needed positions.
Every single new resident will need accommodations, whether buying or renting. That’s why we believe that the new immigration policy will be a massive boost for the real estate market and the economy as a whole. For homeowners thinking of selling, this is fantastic news. However, buyers may soon begin to notice more competition for available listings.
The Government Will Double Down on Efforts to Build Affordable Housing
Available housing is already in short supply, which led to the real estate boom we experienced over the last two years. Bringing in 500,000 new immigrants will upset this supply and demand even further, putting pressure on provincial and federal governments to address the issue.
Already, there are policies in place to help make housing more available and affordable. The federal Housing Accelerator Fund aims to create 100,000 new homes over the next five years. And according to the Canadian Mortgage and Housing Corporation, Canada will have 19 million new housing units by 2030 if construction continues at the same pace.
Provincially, plans are in place to cut development costs and allow current property owners to build up to three residential units on a single lot.
Interest Rates Will Hit Their Peak
There is no question that rising interest rates were the catalyst for the sudden drop in housing sales. The Bank of Canada raised the rate by a full percentage point in July 2022 in an aggressive attempt to curb inflation.
The impact on the already slowing real estate market was immediate and drastic. Buyers put their plans on hold, and homeowners struggled to sell. However, these sharp interest rate hikes are likely at an end for the time being. At the very least, they will return to more traditional 0.25-point increments.
Some aspects of real estate never change, regardless of the market or the economy. Here are a few things you should know that you can always count on:
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Housing Prices Will Drop in the Short Term
After the rollercoaster ride of 2021 and 2022, many analysts predict that 2023 will usher in a return to more balanced conditions in the real estate market. The Re/Max 2023 Housing Market Outlook suggests housing prices will drop 3.3% from the 2022 average.
A report by Desjardins goes even further, suggesting that housing prices will drop 25% by the end of 2023.
Even with higher interest rates, that might be enough of a price dip to encourage would-be buyers to get back into the market. This leads us to our next prediction:
Housing Sales Volume Will Increase
Even with falling prices, real estate sales have been slow over the past six months. The fast and furious pace of interest rate hikes shocked the market, which simply needed time to adjust. Now, we are at the nine-month mark from when interest rates began to climb.
During that time, demand for housing hasn’t disappeared. People are still getting married, having babies, looking for larger homes and downsizing.
A recent survey indicates that the intent to buy a home is back to pre-pandemic levels, with many potential buyers resuming their search in 2023. In October 2022, housing sales began to pick up slightly. Many experts believe that we are now at the “beginning of the end” of the slowdown.
Regardless of what happens, it will be interesting to see how these projections play out throughout 2023. In any case, the one thing we can count on is that the market is unpredictable. Even if every analyst is correct, there are too many variables, regions and micro-markets to base decisions on these predictions. As always, your best bet is to make your move when it is right for you.
Do you have a move coming up in 2023? We can help you navigate the changing market to get the best possible results, whether buying or selling. Best of all, you can book a free consultation where we will answer any questions you may have. Reach out today right here or call 905-332-9223 to schedule your appointment.