After a big correction in 2022, real estate experts are forecasting that prices will continue to drop in Ontario this year, but not much further than they have already.
According to CREA, the average sale price of a home in Ontario peaked at $1.18 million in March. That represented 64% leap in just two years, from the start of the COVID-19 pandemic.
Since then, average home prices have fallen by nearly 20%, but even that sharp decline only takes prices back to the level they were at in September of 2021.
According to Rishi Sondhi of TD Economics, prices in Ontario will decline through early 2023 but bottom out in the second half of the year.
"We are expecting further downside to prices but less relative to what we've seen so far," said Sondhi in an interview. "We think that the bulk of the correction is behind us."
That's partly because there are some signals that the bulk of the Bank of Canada's interest rate hikes are behind it. The central bank raised its rate seven times in 2022 in an attempt to tackle inflation.
The drop in home prices to start off the new year could have a positive impact in driving sales by attracting buyers who have been wary about the market, especially in the Toronto area.
"While home prices in Toronto and the surrounding area have come down from their peak, affordability remains a real challenge for many in Canada's second-most expensive city. Once interest rates stabilize, I believe many buyer hopefuls who have been sitting on the sidelines will return to the market," said Karen Yolevski, CEO of Royal LePage Real Estate Services Ltd.
Yolevski also points out factors like record-breaking immigration creating additional demand in the housing market, adding that this stress "will be placed on a region struggling with a chronic shortage of inventory, whether from newcomers themselves or investors looking to take advantage of a boost in rental demand."
According to Yolevski, a record-breaking number of condominium completions is expected in the region this year, which should offset this stress on supply to some degree and give the rental market "a much-needed boost."
Stay tuned for my market update coming at the end of this month. As always, feel free to contact me with any questions.