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What 2023 may have in store for mortgage rates and housing affordability

posted on February 16, 2023

With soaring mortgage rates and falling home prices across Canada in 2022/2023, many Canadians are bracing themselves and wondering what's in store for the remainder of 2023. 

General market status and predictions

Generally, real estate experts expect that real estate prices will continue to fall, but not by much.

"We think that the bulk of the correction... is behind us."

 - Rishi Sondhi, TD Economics

The Bank of Canada raised its interest rates seven times in 2022 to fight inflation, but this may well stop. High interest rates have reduced demand in the housing market significantly, but demand is expected to rise this year.

Plummeting prices have impacted supply, as property owners are increasingly wary of listing their homes and properties. New home construction is also slowing down considerably. It is anticipated that listings and sales in Ontario will remain low -- at least for a good chunk of this year.

Due to a drop in condo pre-construction sales, elevated construction costs and high interest rates, the Canada Mortgage and Housing Corp. (CMHC) has warned that condo developments may be cancelled this year. 

2023 housing price predictions

ReMax anticipates that 2023 GTA real estate prices may drop by 11.8 per cent as compared to the 2022 average. They anticipate that prices in markets outside the GTA will fall further, with drops up to 15 per cent in London, Kitchener-Waterloo, Barrie, and the Georgian Bay area. They anticipate miniscule increases (2-8%) in cities like Ottawa, Hamilton, Windsor and Sudbury. 

Across the country, the CMHC anticipates that the average sale price will decline until the second quarter of 2023. 

Implications for potential first time buyers

2023 might be a good year to buy into the housing market, but could also be less than ideal. TD Bank's financial analysts have predicted that housing prices may reach a new low point before they begin to swing back up towards higher values in 2024. This low could hit by early 2023. It could entail up to a 20-25% drop (when compared to the highest price point of 2022). Lower housing prices will be most noticeable in Atlantic Canada, Ontario and B.C.

Should you buy property this year?

The dip in Canadian real estate prices is enticing for buyers -- especially those previously priced out of their desired markets. But purchasing a home in 2023 will come with its own challenges such as the current high interest rates and a dwindling supply of homes available for purchase. When interest rates are high, you may qualify for a smaller mortgage than you anticipate. It's important to get pre-approval to see what's possible before you start house hunting. This article answers some key questions you may have about buying a home when rates are high. Low housing supply could translate into a lack of desirable properties to purchase and potential bidding wars. 

If purchasing a home is out of scope for you this year, we recommend finding an affordable rental property to reside in and saving and investing your money strategically so you can generate a sizable down payment for a home in the future when the market is less volatile. 

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