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Posthaste: Home prices in Canada not done falling from 2022 peak, says TD report Back to video

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Canadian home prices have further to fall, with the average price not expected to bottom out until the second quarter of this year, says a new report from Toronto-Dominion Bank.

Economist Rishi Sondhi said the average price of a house is likely to drop by 21 per cent in all before the market bottoms. But that won’t be enough to wipe out the gains made during the height of the housing market, which peaked in February 2022.

“All told, Canadian average home prices will have likely fallen by 21 per cent on a peak-to-trough basis, retracing less than half of the 47 per cent gain recorded during the pandemic,” he said in the report released on April 4.

TD said further drops to prices will come as a result of “looser-than-normal conditions” in Ontario and British Columbia, Canada’s real estate powerhouses. Atlantic Canada will also see prices fall for most of the year, as fewer people move to the East Coast and the housing market comes off of “outsized, pandemic-era gains,” Sondhi said. Prices in Quebec and the Prairies are likely to be more resilient, thanks to tight markets in the former and strong demand in the latter.

Sales, however, appear to have “reached a trough,” Sondhi said. Though sales are expected to drop in 2023 on an annual basis, on a quarterly basis, they’ll record gains. Ontario and British Columbia will lead the growth, with sales expected to be stronger in the second half of the year. The TD report also predicted sales would stay “comparatively elevated” in the Prairies.

Still, the upswing in quarterly sales shouldn’t be interpreted as a “sign of strength” in the housing market, Sondhi said, with sales in Ontario and British Columbia coming in at levels not seen since the early 2000s.

Sales might also get a further bump if wages continue to rise. Hourly wages were up 5.4 per cent year over year in February, according to Statistics Canada. Lower bond yields could also help bring down borrowing rates, improving affordability, TD said.

Reports out this week from real estate boards in Toronto and Calgary indicated some life in housing markets.

The Toronto Regional Real Estate Board said on April 5 that sales rose 44 per cent in March from February, with prices up 1.2 per cent. Year over year, sales and prices were down 37 per cent and 15 per cent, respectively, showing the market still has a lot of ground to retrace.

In Calgary, prices increased two per cent in March from the previous month, and were up almost one per cent from a year ago, according to that city’s real estate board.

Still, Sondhi noted the housing market faces headwinds, which could change the outlook. One “major” risk is possible tightening by the Office of the Superintendent of Financial Institutions (OSFI) of lending rules and stress test conditions for mortgage approvals. Another risk is stock market volatility. In March, banking-crisis fears following the failure of two mid-tier banks in the United States, brought turbulence to markets. As a result, the finance-heavy TSX fell, with Canada’s Big Six banks giving up $49 billion in value.

Sondhi also cautioned that the economic outlook is fluid and the potential for “weaker-than-expected economic performance” remains, posing another risk for the housing market.

Posthaste will be taking a break on Friday, April 7, but will return on Monday, April 10.

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Toronto home prices may turned the corner in March as rising competition in a tight market pushed sales and prices higher month over month.

While prices were down nearly 15 per cent from the same time last year as demand buckled under the weight of interest rate increases, they were up more than one per cent from February, according to data from the Toronto Regional Real Estate Board.

The number of homes changing hands rebounded from a subdued February with a 44 per cent jump in sales to 6,896. However, sales remained down over 36 per cent from March 2022, still showing the toll rate hikes have taken on the market. — Stephanie Hughes

Read the full story that sales rose 44 per cent.

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Investing columnist Martin Pelletier is on the hunt for a new home in Calgary but is encountering a tight market with people bidding on a limited number of listings. Rather than go head-head over the same homes, Pelletier decided to widen his search to listings getting less attention, a strategy he advises can be easily applied to stocks. Read his story here.

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Today’s Posthaste was written by Gigi Suhanic, (@gsuhanic), with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.

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