CMHC Report Predicts Housing Market Slowdown in Canada for 2023
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The Canadian housing market is predicted to experience a decline in prices and housing starts in 2023 due to weaker economic growth and higher mortgage rates, according to the Canada Mortgage and Housing Corporation’s (CMHC) Spring 2023 Housing Market Outlook. The report expects the decline in prices to continue but not revert to pre-pandemic levels, with the average price bottoming out sometime in 2023. Housing starts are also expected to decline significantly in 2023 due to constraints in new construction, including labor shortages and elevated costs of materials in the construction sector, combined with higher project financing costs from increased interest rates.
CMHC predicts that greater rental demand will lead to tighter conditions in already strained markets and higher rents, with demand driven up by affordability challenges in homeownership and high immigration levels. However, the report notes that there are significant risks to the baseline scenario, with additional risk of lower housing prices and starts if inflation (and mortgage rates, as a result) remains higher for longer.
Although housing prices and sales are expected to record year-over-year declines for 2023, CMHC predicts that prices, sales, and housing starts will record growth in the 2023-2024 period onward, with inflation coming back to the 2.0 per cent target by the end of the forecast period and supporting both housing demand and a recovery in the construction of new housing supply. The Prairie provinces are expected to see more positive housing market developments than other regions due to high interprovincial migration, relatively healthy ownership affordability, and a generally stronger economic outlook, while Ontario, British Columbia, and Quebec are expected to see large declines in 2023 housing starts compared to other regions, which is "discouraging" because these provinces are home to the three largest housing markets that are already highly supply constrained.
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