TD reduces its home sales and prices forecasts sharply

The latest report by TD says real estate sales in Canada may go down by almost a quarter in 2023 and remain low even during the next year.

According to TD Economics, the bank has “significantly” reduced its home sales and price forecasts compared to March, as the extent of monetary policy tightening was higher than expected.

TD Economics believes growing borrowing costs will “have a strong impact on real estate activity,” with the peak-to-trough decline (the difference between the highest and lowest points) between the first quarters of 2022 and 2023 going up to 33%.

After that, housing activity is expected to start stabilizing, but remain low as interest rates decline.

As a result, we’ll see a 23% year-over-year average decrease in Canadian home sales this year, before going back to an 11.9% average drop in 2023.

The bank expects average home prices between the first quarters of 2022 and 2023 to also go down because of a weaker demand. The report says a peak-to-trough decline may reach 19% and then show moderate growth.

The forecast follows a series of interest rate hikes by the central bank amid record high inflation.

The TD Economics expect the BoC’s key lending rate to reach 3.25% by Q1 2022.

The report also provides forecasts for average annual growth and decrease in home sales and prices by province, with B.C. and Ontario expected to show the largest drops in 2022 and 2023. According to TD Economics, it reflects “a sharp affordability deteriorations during the pandemic.”

A report released last month by Desjardins says home prices in Canada  may go down by 15% to about $675,000 in December 2023, following a peak of over $790,000 seen in February 2022.

Nevertheless, Desjardins says $675,000 still exceeds December 2019 numbers with its average price of $530,000 by almost 30%.


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