Desjardins Predicts Canadian Property Prices to fall 25%

by Editor

According to research, Canadian home prices may decline by 25% by the end of the year.

Desjardins Economics projects a 23% decline in the national average house price by the end of the year, a considerable drop from its prior projection.

According to Desjardins, “Canada’s housing market is correcting quickly, and faster than we anticipated in our downbeat June forecast.”  The Montreal-based financial services company had predicted that the value of homes across the country would drop by 15% during the same time period.

Randall Bartlett, Helène Begin, and Marc Desormeaux, economists at Desjardins, said in their analysis released on Thursday that the average property price has already fallen by 15%, or more than 4% in “each of the three months through June.”

The Desjardins team said that their “gloomier” forecast was inevitable given the fast declining property sales and increasing borrowing prices brought on by the Bank of Canada’s rate rises.

This correction, Desjardins Economics said, “is assisting in restoring some sanity to Canadian real estate.”

The economists stated that they “continue to believe that home prices will generally fall the most over the forecast in provinces that saw the largest gains during the pandemic.”

Desjardins says that a sharp market correction would hurt New Brunswick, Nova Scotia, and P.E.I. the most, with prices falling by 29, 27, and 25% from the peak in February 2022 to December 2023. This is after prices rose by 71%, 67%, and 62% from December 2019 to February 2022.

Desjardins predicts that prices will drop 22 and 24%, respectively, from the peak to December 2023 in B.C. and Ontario, Canada’s housing juggernauts, where “the correction… has been more abrupt than elsewhere.” They increased by an average of 43% and 58% between December 2019 and February 2022.

The Greater Toronto Area exhibits what Desjardins calls the “biggest price swings” in Ontario.

However, analysts predicted that as global immigration, increased employment, and increased affordability support the housing market in the future, the rate of price decline will slow.

The analysis stated that the correction has been “less severe” in Quebec and predicted that prices will fall 17% by December 2023 after soaring 51% from the end of 2019 to the high in February of this year.

Desjardins anticipates that Quebec will do better since housing costs are lower there ($510,000 on average in April against $1 million in Ontario in February) and because Quebecers are in “better financial shape.”

In this turbulent time, the energy-producing provinces of Saskatchewan, Alberta, and Newfoundland stand to benefit the most.

“They’re now benefiting from post-pandemic tailwinds, largely in the form of higher commodity prices.” The Desjardins analysts predict that the resultant job development and the employees it draws from around the nation will sustain existing property sales and prices.

From the peak through December 2023, prices in those three provinces are anticipated to decline by more moderate rates of 4, 9, and 11%, respectively, after rising by 13, 23, and 26%.

From Desjardins’ perspective, there is a “silver lining,” though.

The experts stated that after increasing in the spring, the rate of sales drop had slowed.

Additionally, despite the double-digit corrections experienced nationwide, prices will continue to be higher than they were before the outbreak.

Desjardins thinks that the Bank of Canada’s policy rate will “top out” this year at 3.25 percent. In 2023, when the housing slump slows the economy, the institution will change its mind and start lowering rates.

“The Canadian housing market downturn is creating challenges for households. Both home sales and prices have contracted quickly and are likely to fall further over the next 18 months. While we don’t want to diminish the difficulties some Canadians are facing, this adjustment is helping to bring some sanity back to Canadian real estate,” the report said.

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