The recovery from the pandemic has proven volatile for the real estate market in Ontario. Q3 2023 will likely mark the end of the Bank of Canada's interest hike campaign and the lowest housing prices in Ontario during the pandemic recovery. Here's an in-depth view of the predictions for the rest of 2023.
Market Moving to Favor Sellers
The Ontario real estate market is poised to undergo a potential downturn in Q3, creating a shift in the balance of power in favor of sellers. Several factors contribute to this anticipated trend. Most significantly, the Bank of Canada appears to be done with interest rate hikes. This points to rate cuts as fall approaches likely.
Moreover, economic uncertainties and potential global market fluctuations have added a layer of caution among buyers, leading to decreased activity across consumer spending. These combined factors will likely reduce buyer interest, resulting in a surplus of inventory and more negotiating power for sellers.
Ontario Bears The Brunt of Downturn
Ontario was hit particularly hard by the Bank of Canada's interest rate hikes earlier in the year. The province maintains a higher level of indebtedness relative to the rest of Canada, so those interest rate hikes seriously constricted the spending power of many households, especially those with variable-rate mortgages. The slow in consumer spending will likely strain the entire economy of the province in the remainder of 2023 and into 2024. This downturn is still a part of the pandemic recovery and contributes to the normalization of the economy.
Home Prices to Bottom Out in Q3
Many experts agree that home prices are still lowering due to the lack of spending, and we're in the midst of prices bottoming out in Q3. Home prices are down 7.6% year over year in Ontario for a median sale price of $610,000. In Canada, home prices have dropped 21% since their peak in 2021. Throughout the year and into 2024, quarterly price growth will likely remain constrained due to spending in the country.
Immigration Increasing Housing Demand
Ontario is no stranger to housing supply problems, and the record-high number of immigrants is adding stress to the province's housing market. The Canadian government has set goals to correct the lack of housing supply, but it's very ambitious, and rent prices are already skyrocketing in the recovery from the pandemic. This goal is more long-term, so for Q3, expect a continued lack of supply for the high housing demand and the effects this has, such as higher rent prices and short stays on the market.
Interested in Real estate investment in Ontario? Q3 may be a good time to jump in. Schedule a consultation with experts to figure out what's right for you.