After the pandemic shook the market, property prices rose significantly in 2020 and 2021. In 2022, we saw this trend start to change with the recovery from the pandemic and efforts from the government. In 2023, we expect to see even easier days than in 2022 and hope in property investing.
Interest Rate Hikes
In 2022, the Canadian government hit the economy with seven interest rate hikes, taking the interest rate from 0.25% in February to 4.25% in December. These changes attempt to reduce inflation by reducing demand which has been working; home sales were down 39% over the year. While the Bank of Canada has signalled an end to this economic correction, they expect interest rates to remain high through 2023 to keep house prices dropping. The central bank's policy is currently at a 15-year high of 4.25% or 4.5%.
Continued Demand in Urban Centers
The trend of high demand in major urban areas and cities outside these areas is expected to continue through 2023. For Ontario, places like London, Windsor, and Hamilton may be some of the best places to invest in the new year.
To read about the hotspots for investing in Ontario, visit www.regalwayhomes.com/post/ontario-s-hottest-spots-for-real-estate-investing-in-2023
These cities are expected to continue to see high volumes of people moving into the areas and increased demand for rental units. Often, these cities struggle to supply the high demand for rentals, and units don't stay unoccupied for long.
Home Prices Dropping
Home prices are continuing to drop from record highs in February 2022. Some estimate that early 2023 will see a low point in Canadian housing prices, partially because of the government corrections in the economy. This change should be seen globally in the new year, though some countries like Canada may notice a minor recession early in the year.
Conclusion
Home prices are expected to bottom out because of a rise in interest rates and low demand. This is an expected and calculated move toward recovery. Without any major shocks in 2023, it is shaping up to be a year for economic normalization. The trends that started in 2022 are expected to continue through 2023, and we hope to see an economy similar to pre-pandemic life by the end of the year.
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