Provincial Housing Market Outlook

Home Prices to Fall Further Under the Weight of Higher Rates

Rishi Sondhi, Economist | 416-983-8806

Date Published: June 29, 2022


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  • We’ve downgraded our home sales and price forecasts significantly compared to March, as monetary policy has tightened more acutely than anticipated. Indeed, the overnight rate is forecast to rise an additional 175 bps from its current level, hitting 3.25% in 2022Q4. 
  • Rising borrowing costs will continue to weigh heavily on housing activity. We forecast a 33% peak-to-trough decline in Canadian home sales from 2022Q1 – 2023Q1.  Beyond that timeframe, activity should begin to firm, (while remaining at low levels) through the remainder of next year, as interest rates drop from their multi-year highs. This dynamic results in a 23% annual average decline in Canadian home sales in 2022 and a 12% pullback in 2023.
  • This substantially cooler demand backdrop should weigh on Canadian average home prices such that they fall 19% on a peak-to-trough basis from 2022Q1 – 2023Q1. However, home prices are likely to grow modestly thereafter, alongside some recovery in demand.
  • By province, home sales and prices are likely decline the most in B.C. and Ontario, on average, in 2022 and 2023. This reflects significant affordability deteriorations during the pandemic. Quebec also sees relatively modest price growth due to the notable deterioration in affordability since early 2020. 
  • In Alberta, sales are expected to retrench significantly from their record highs. However, they should remain closer to pre-pandemic levels than either B.C. and Ontario through 2023, supporting tighter markets and stronger price growth. 
  • Prices should hold up better elsewhere in Canada, with the best affordability conditions in the country cushioning other markets in the Prairies and Newfoundland and Labrador. Strong population growth and tight conditions should offer near-term price support to the rest of the Atlantic, although activity in this region should cool as rates ratchet higher.