How will Canadian real estate prices change?

Falling housing prices in Canada’s hottest markets have been one of the most important trends this year, and the end of 2022 doesn’t seem to show strong signs of slowing down, with national prices continuing to decline in November.

Teranet-National Bank’s National Composite House Price Index, which tracks repeat sales of single-family houses in Canada’s largest markets, went down by 1.3% last month, with prices reporting faster decreases than during the previous month as the weaker activity keeps affecting the market.

Large price declines in Vancouver, Montreal, and Ottawa-Gatineau helped support that tendency in November: according to the Canadian Real Estate Association (CREA), the average national price also fell to about $630,000.

In comparison to the red-hot activity that has been hitting Canada’s real estate market for almost two years after the beginning of the COVID-19 pandemic, the decline in average prices this year has been sharp. Teranet-National Bank’s home price index went down by 9% since May, with Toronto (usually one of Canada’s most expensive markets) showing a drop of about 13%.

Although this tendency may upset many current homeowners who’ve faced a drop in the value of their houses, we shouldn’t forget that housing is still a sound long-term investment in Canada, according to certain industry experts.

According to RBC Economics, although real estate markets across the country remain in “correction mode” with falling prices, that trend may be close to its end.

The recent report by the bank shows that although a weaker market is expected to go on during the coming months, price decreases could reach their bottom and change the direction by the spring in case the central bank stops its rate-increasing cycle, as predicted.

However, it will depend on the market. For instance, in Toronto, the correction is moderating, RBC says, as higher interest rates and affordability issues keep affecting borrowers.

It’s not easy to predict where home prices or interest rates will be in 3-6 months, but the long-term tendencies are less difficult to forecast based on the history of Canada’s housing market.

Many people now understand that although the market may go up and down short-term, the long-term forecast for Canadian real estate remains very positive.