“Bank of Canada raises its benchmark interest rate”…how many times did we hear that in 2022! 7 times to be specific. Without question, 2022 was a rollercoaster ride for real estate markets across Canada, with rate hikes having consistent and significant impacts felt nationwide – from record-low rates in early 2022 and the subsequent buyer frenzy that ensued, to a 4% total increase in the BoC overnight rate over the last 10 months that has led to Canada wisataedukasiindonesia.com wide November ‘22 monthly sales activity down 38.9% below the previous year (Canadian Real Estate Association). According to The Spaull Brothers Realtors, the Ottawa market was not any different, with December 22’ Ottawa Real Estate Board stats showing residential sales down 22% and average prices dropping 7% from December ‘21. As one would expect, the uncertainty and unpredictability of the last year have caused many buyers to resort to a “wait and see” approach until higher authorities start to provide clearer and more reassuring economic guidance. So, where does this leave us as we set out in 2023?
The Spaull Brothers Real Estate Analysis
TD Bank economist, Rishi Sondhi, in a recent market outlook publication (LINK) believes that Canadian home sales will bottom sometime in early 2023, which would represent around a 20% decline in home prices from their peak in early 2022. It is expected that the Bank of Canada will raise rates one further time at the end of January ‘23, which will coincide with home prices hitting this forecasted bottom within the following months. Sondhi does not believe home prices will bounce back quickly though once this bottom is reached, instead, he predicts it will take until 2024 before we see average home prices return to positive territory on an annual average basis.
Buyers Advice FromThe Spaull Brothers Realtor
As a buyer who may have delayed their purchase over the last few years due to skyrocketing home prices or more recently surging interest rates, what does this projected forecast mean? I believe it means now and over the next 12 months, there is a huge opportunity to take advantage of a cooling market. As we all know, it’s next to impossible to perfectly time your entries and exits into real estate, however, the case for a shifting housing market is growing and when planning to purchase and hold for the long term, 2023 may present that chance to “buy the dip”.
But how long will this cool market last? Historically, real estate in our country has been one of the safest forms of investment with a largely upwards long-term trend. There are 2 major economic factors that should be mentioned, which have historically and that I believe will once again result in home prices moving upwards. Those 2 factors are immigration and labor shortages. Immigration into Canada is setting record-breaking levels and is expected to continue to grow at rapid rates in the coming years. According to Citizenship Canada, approximately 4.8 million applications were processed in 2022 compared to about half of that in 2021. These massive influxes of new people into our cities over the coming years will without a doubt put further pressure on a housing market already facing supply issues and in turn, result in an upward trend for prices.
Another major economic trend that has and will continue to contribute to higher home prices, is the growing https://bellringers.net/ shortage of tradespeople. According to BuildForce Canada, an organization whose mandate is to support the labour market development needs of the Canadian construction industry, this problem will continue to persist unless government intervention is taken. In their 2022-2031 Residential Highlights Report, BuildForce indicates that a decades-long decline in youth entering the trades, coupled with an estimated 128,000 tradespeople (22% of the current labour force) set to retire in the coming years, will require 107,900 new workers by 2031 in order to meet growing industry demand.
Wrapping This Up Thoughtfully
With clearer economic skies emerging, housing inventory up from pandemic levels, and home prices on the decline, those who have patiently waited out the past few years to purchase, could have a tremendous opportunity before them in 2023. If you are considering purchasing this year and have any questions on the current market please reach out to us at https://spaullbrothers.ca/about/, we’d love to connect!
Michael and Christopher Spaull are registered Ottawa Realtors with over 12 years of experience servicing home buyers and sellers. Born and raised in the Nation’s Capital, they bring extensive knowledge of the Ottawa area to their clients and leverage their strong business acumen and analytical skill sets developed through an M.B.A. and B.Com. to help their clients meet their real estate goals.