Deepest decline in home prices expected in Q1 2023: Royal LePage

• Based on the data shared in the Royal LePage Market Survey Forecast, double-digit year-over-year declines are expected in the first quarter of 2023, with modest quarterly price growth in the year’s second half.

According to Royal LePage, Canada’s national aggregate home price will end 2023 one per cent below the fourth quarter (Q4) of 2022. 

Based on the data shared in the Royal LePage Market Survey Forecast, double-digit year-over-year declines are expected in the first quarter of 2023, with modest quarterly price growth in the year’s second half. 

On a quarter-over-quarter basis, Royal LePage expects prices to flatten in the second quarter and begin modest improvement in the second half of the year, ending 2023 on an upward trajectory.

Condos expected to outperform homes in most major markets

Condominium prices are expected to outperform single-family homes in all major markets except for Edmonton and Winnipeg.

The greater regions of Toronto and Montreal are forecast to see an aggregate price decline of two per cent year-over-year in Q4 next year, while the aggregate home price in Greater Vancouver is projected to dip one per cent year-over-year.

Phil Soper, President and CEO of Royal LePage, said, “the frenzied housing market overshot, and the inevitable downward slide or market correction began, intensified by rapidly rising borrowing rates…While the volume of homes trading hands has dropped steeply, home prices have held on, with relatively modest declines.” 

Soper also points out that there are a number of factors supporting home prices in the current environment, such as the long-term housing supply shortage in Canada and pent-up demand from buyers who have the ability to transact but have chosen not to in these turbulent times.

Progressively less price declines

“Comparing prices to the previous year, the first quarter of 2023 should show the deepest decline in home values,” said Soper. “At that time, we will be comparing 2022’s final weeks of pandemic housing market excess – when home prices reached historically high levels – to a much quieter market, where values have had a full year to moderate.”

Soper expects year-over-year comparisons to show progressively less price decline as the year progresses, with small week-to-week improvements in the third and fourth quarters, allowing Canadian home values to end 2023 essentially flat to where we are today.

While home prices have come down from the record highs recorded in the first half of this year, they remain well above pre-pandemic levels. 

Royal LePage’s projected aggregate price of a home in Canada in Q4 of 2023 is expected to sit 15 per cent above Q4 of 2020 and 18.4 per cent above Q4 of 2019.

Greater Toronto AreaL

According to Royal LePage, the aggregate price of a home in the Greater Toronto Area is expected to decrease two per cent year-over-year to $1,056,734 in the fourth quarter of 2023. 

During the same period, the median price of a single-family detached property is expected to decline 2.5 per cent to $1,329,413, while the median price of a condominium is forecast to increase modestly by one per cent to $701,243. 

Royal LePage predicts that activity levels in the GTA will pick up again by the middle of 2023, provided that interest rates stabilize and consumer confidence is restored. 

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