What a year it has been in Real Estate. As we bid farewell to 2023, it’s time to reflect on the highs and lows that defined the Canadian real estate market this year. The landscape has been shaped by a number of factors, from economic shifts to policy changes, each leaving its mark on the housing market.
In this blog, we will delve into the key elements that shaped the Canadian real estate scene in 2023, exploring the nuances of supply and demand, inflation, and emerging trends. Then, we will take a look at the current forecast for the 2024 market.
Some Headlines from the 2023 Housing Market
The Canadian housing market dynamics were included in some of the major headlines throughout the year. Let’s break down some of the main events that took place in the real estate industry this year.
Rising Interest Rates from the Bank of Canada
The Bank of Canada’s goal to tame inflation is largely controlled by the benchmark overnight lending rate, which determines mortgage rates, lines of credit rates, etc. By raising the benchmark price, the government hopes to slow down consumer spending, including within the housing market. From March of 2022 to July of 2023, the Bank of Canada has raised interest rates 10 times. In February of 2022, the benchmark overnight was at .25% and now sits at 5%.
Effect of Rising Interest Rates on Housing Demand
A noteworthy aspect of the 2023 Canadian real estate market was the lower demand witnessed in certain regions. As economic uncertainties loomed, buyer confidence waned, leading to a slowdown in purchasing activity. This was particularly evident in areas where home prices had escalated dramatically in the preceding years.
The rapid rise in interest rates really took hold of the real estate market in the 2nd half of 2023. Where 2020 saw high home prices due to high demand, 2023 has brought lower housing prices and lower demand across the Canadian housing markets.
The shift in demand dynamics prompted sellers to recalibrate their expectations, with some adjusting listing prices to align with market realities. While this adjustment contributed to the moderation of price growth, it also highlighted the delicate balance between buyer affordability and seller expectations.
The perennial dance between supply and demand continued to be a defining feature of the Canadian real estate landscape in 2023. Housing inventory, which had been a point of concern in previous years, witnessed fluctuations driven by various factors.
As of December 1st, 2023, the number of residential properties for sale in the market (inventory levels) is the highest we have seen since 2010. In addition to the increase in active listings, the year-to-date home sales are down by 11% over last year and are 30% lower than the 5-year trend.
With the higher number of homes for sale on the market and fewer people buying homes, this has put downward pressure on the average sale price of homes (supply and demand). The average home price in the greater Hamilton housing market decreased by approximately 3% for the year.
Lower Home Prices
The Canadian Real Estate Association (CREA) statistics reveal a shift in the trajectory of average home prices throughout the year.
In the first quarter of 2023, the average price of new listings continued its upward trend because of the lingering demand of a seller’s market from the previous years.
However, as the year progressed, the market conditions and housing prices underwent a noticeable change. By mid-year, the rate of price appreciation began to decelerate, indicating a levelling in the pace that had characterized 2020 and 2021. The market saw price declines and fewer new listings and real estate transactions as the year progressed.
This is further confirmation of a cooling or levelling of housing market conditions.
Other Factors in the Economy
Canada’s housing market is inextricably linked to the overall health of the economy. In 2023, the country experienced a mix of economic factors that influenced housing dynamics. GDP growth, unemployment rates, and inflation played pivotal roles in shaping buyer confidence and affordability.
Early in the year, a robust economic recovery buoyed by increased consumer spending and government stimulus measures seemed to set a positive tone for the real estate market. However, as the year progressed, concerns about inflation and rising interest rates emerged.
Affordable Housing
Government policies and interventions played a crucial role in shaping the 2023 Canadian real estate market. Policymakers grappled with the delicate task of fostering a stable housing market while addressing concerns about affordability and speculation.
In an effort to cool down overheated markets and curb speculative activities, some provinces introduced measures such as foreign buyer taxes and stricter mortgage qualification criteria. These interventions aimed to balance out the market and housing activity, preventing it from becoming excessively skewed in favour of sellers.
On the other hand, recognizing the importance of housing affordability, especially for first-time buyers, some provinces also introduced initiatives to stimulate housing supply and support entry into the market. These included incentives for developers to build affordable housing and measures to ease regulatory hurdles.
Amidst the evolving economic landscape, housing affordability remained a central concern for policymakers and prospective buyers alike. The Canadian government, recognizing the need to address affordability challenges, implemented various measures to stabilize the market.
Some provinces introduced foreign buyer taxes and stricter mortgage qualification criteria to curb speculative activities and cool down overheated markets. On the other hand, initiatives aimed at stimulating housing supply and supporting first-time buyers were implemented to foster a more inclusive and balanced real estate landscape.
Looking Ahead to 2024:
Overall in the province of Ontario, we are still in a major housing crisis. With the large amount of immigrants moving into Ontario, they all need a home to live in. Whether they are renters or buyers, the number of newcomers puts a strain on the overall housing market.
Overall experts agree that the Bank of Canada has completed its phase of interest rate hikes and we could even see 2-3 interest rate reductions in 2024.
With these 2 factors in play, I believe we will see a normalization in the residential real estate market. It will be a balanced market for both buyers and sellers. We will not see the panic buying that we saw in 2021, and I believe inventory levels will decrease and the number of homes sold will increase from our current levels.
Normal factors such as location and condition of homes will play a bigger factor in the value of the market compared to the interest rate climate that has been the determining factor in the past few years.
From the Voortman Realty Team:
Despite the turbulence in the market in the last 18-24 months, Voortman Realty continues to grow. Just recently, Lindsay McFarland has joined our team, and I am pleased to report that Sofia Voortman has completed her real estate courses. And, in addition to being our client care co-ordinator, she is now a licensed realtor.
Our success in the past and in the future will be to guide our clients – whether buyers or sellers – through the ever-changing and challenging market conditions.
Being a small real estate company our ability to service our clients is second to none. Many clients have told us that their previous experience with the larger real estate companies or real estate teams out there results in them getting lost in the crowd of clients of the companies or teams that represent them. When they switched over to Voortman Realty, they appreciated not just being respected as clients, but as individuals who have unique needs when it comes to real estate.
Ready to Start or Continue Your Real Estate Journey?
So, if you are a first-time home buyer and need to know how the process works or have owned a home for years and just want to know the value of your home in today’s ever-changing market, give us a call today!
Contact us and see first hand the difference that hundreds of other Voortman Realty clients have experienced. I promise that you will not be disappointed.