Canadians Hesitant to Enter Housing Market Amid Market Volatility and Affordability Concerns
Drop in Canadian home resales forecasted for the next year, predicts forecast
In 2023, the Canadian housing market is experiencing a period of uncertainty, with many potential buyers reluctant to enter the market. This reluctance is due to several key factors, including affordability issues, mortgage renewals and interest rates, market volatility, and concerns about speculation and foreign investment.
Affordability has been a significant challenge in recent years, with cities like Toronto and Vancouver seeing significant price gains. Many buyers have had to scrape by on minimum down payments from 2021 to 2023. Rising interest rates and the looming renewal of 1.5 million mortgages by 2026 may cause financial strain for existing homeowners, further deterring new buyers.
The Canadian real estate market is also experiencing volatility, with risks of price drops, making it less appealing for potential buyers. There's a reliance on foreign investment to support pre-construction sales, which can sometimes lead to concerns about speculation rather than genuine demand from owner-occupiers.
Forecast for Home Resales and Prices
The forecast for the rest of the year indicates a cautious market. The rapid growth in the Canadian housing market has slowed, and it is no longer seen as an unstoppable force. There are predictions that home values could drop due to market conditions, including rising interest rates and abundant mortgage renewals.
Reluctance to enter the market, coupled with seniors' hesitation to downsize and release more inventory, may further reduce demand and stabilize or lower prices. The condo market is experiencing challenges, with many buyers facing financial difficulties as a result of the market's collapse.
Despite the challenges, there are signs of a recovery in the housing market. The number of homes resold in 2023 is expected to decrease by 3.5% compared to last year, with approximately 467,100 old homes being resold. However, the signs of a recovery are already visible, with prospective buyers shedding their economic fears and interest rates falling.
The decline in the housing market is attributed to a variety of factors, including the trade war with the U.S. President Donald Trump, a fragile labour market, reduced immigration targets, and affordability challenges. Ontario and British Columbia will experience the most significant impact from the cold housing market. The majority of the decrease in home resales has already occurred in the first six months of the year.
The home resale data specifically measures the number of existing homes being resold to new owners. The report predicts a gradual recovery in the housing market to continue in the second half of 2025, setting the stage for stronger demand in 2026. The resale market is expected to see a 7.9% rebound in 2026 with 504,100 homes resold.
While there is an expected overall modest increase of 0.7% in home prices in 2023, prices will continue to fall in the second half of the year and well into 2026, with home prices in Canada expected to decline by 0.7% in 2026. The Prairies, Quebec, and parts of Atlantic Canada are expected to see modest price growth in 2025 and 2026. However, Ontario and British Columbia will see the steepest drop in home prices, largely due to high inventory and strong competition among sellers.
In conclusion, the Canadian housing market is experiencing a period of uncertainty, with many potential buyers hesitant to enter the market due to affordability issues, mortgage renewals and interest rates, market volatility, and concerns about speculation and foreign investment. While there are signs of a recovery in the housing market, the forecast for the rest of the year indicates a cautious market with potential price adjustments as economic conditions evolve.
In the face of economic uncertainties and market volatility, some Canadians might hesitate to invest in real estate, considering the potential financial strain that could come from skyrocketing mortgage renewals and interest rates. Consequently, this wariness could amplify the impact of the slowdown in the housing market, particularly in Ontario and British Columbia. Simultaneously, the forecast indicates a lingering global economic factor affecting the Canadian finance sector, such as the trade war with the U.S., making it challenging to predict the housing market's future trends with precision. As a result, smart investors might find opportunities in navigating the less predictable conditions and seizing chances for profitable investments in other sectors, such as finance or weather-resilient businesses, to achieve long-term financial stability.
