For homeowners and potential buyers, it goes without saying that 2022 was not an easy year. Between rising prices in the housing market, a significant increase in mortgage interest rates and inflation, Quebecers have seen it all. With the new year just around the corner, one question is on everyone's lips: what does the Quebec real estate market have in store for us in 2023?
What if 2023 is the ideal time for the market to catch its breath? A number of predictions have been made regarding the year 2023 by experts in the field for quite some time now. Let's see what happens in the coming year.
The market slowdown: what does it mean?
The year 2022 was marked by economic uncertainty, and this is likely to continue into 2023. Indeed, the purchasing power of Quebecers has weakened significantly over the past year. In this regard, we have noted an increase in listings, a decrease in the number of property sales, and longer sale times.
According to the Association professionnelle des courtiers immobiliers du Québec (APCIQ), in the third quarter of 2022, sales fell by an average of 18%. On the island of Montreal, where the real estate boom hit properties hard, we noted a decrease in sales of nearly 39% compared to last year. According to experts, this downward trend is expected to continue into 2023, although at a much slower pace.
Of course, due to the fragility of the market, it can be difficult to make long-term forecasts for 2023. However, it should eventually begin to level off.
Lower prices are not synonymous with affordability
One thing is certain, the housing market of the last few years will have left its mark on history. Declining inventories, rising demand, booming prices... Property prices have risen dramatically. However, since July 2022, another trend has also been quietly emerging. A gradual decline in property prices has been observed, particularly in the single-family home market.
Of course, the slowdown in sales in the last quarter of 2022 will continue to have a direct impact on property prices in 2023. As supply increases and demand stabilizes, prices will adjust accordingly.
However, although most experts tend to predict a downward price correction across Quebec, the extent of this decline differs greatly from one analyst to another. According to an economist from the Desjardins Group, the median price of properties should fall by almost 17% by the end of 2023. According to the APCIQ, a 5% drop should be expected.
It is also important to note that this decline will differ from one region to another. It is the regions that were most affected by such surging prices that are likely to be most affected by things levelling out.
Will this make it easier to buy property?
Unfortunately, in this instance, lower prices do not mean improved access to home ownership. Although we will see lower house prices, they will still be almost 20% higher than before the pandemic. In addition, with inflated mortgage interest rates, home ownership remains an unattainable dream for many.
Mortgage interest rates: what to expect in 2023?
For many homeowners, the one-off increases in the key rate in 2022 have resulted in uncertainty and stress. In just one year, the Bank of Canada has raised its key interest rate from 0.25% to 4.25%. The increase was initiated to curb the booming real estate market in Quebec.
According to experts, though many have started to feel pressure on their finances from the 2022 increases, the full impact of these increases is yet to be felt. In 2023, homeowners will likely continue to feel the strong pressure of rising interest rates on their budgets. This is a very real and topical concern, with many homeowners in recent weeks having come dangerously close to their trigger rate.
What will mortgage interest rates look like in 2023?
The good news is that, according to many experts in the field, the upward trend in mortgage interest rates is coming to an end. In 2023, the mortgage market looks set to stabilize. Homeowners will have to be patient, however, since this decline is not expected until the last months of 2023. If this is the case, the National Bank predicts that the key rate could, by the end of the year, fall back into the 3.75% range.
However, everything depends heavily on the financial state of Quebec. According to economists, the Bank of Canada is waiting to see a return to normalcy in the Quebec economy before lowering its key rate.
Is a return to pre-pandemic normality possible?
Although it is impossible to know what the future will bring, experts doubt that the policy rate will be as low as 0.25%, as it was in early 2022, any time soon. In the coming years, the new normal is likely to be around 2% to 2.25%.
For those curious, the schedule of planned Bank of Canada announcements was released in July. Here are the dates for 2023:
- Wednesday 25 January;
- Wednesday 8 March;
- Wednesday 12 April;
- Wednesday 7 June;
- Wednesday 12 July;
- Wednesday 6 September;
- Wednesday 25 October;
- Wednesday December 6.
Inflation: its direct impact on the housing market
It goes without saying that 2022 was marked by huge price increases. Rising housing prices, rising gas prices, soaring grocery prices... Everything is more expensive, and this is strongly felt in the wallet of Quebecers.
The majority of Quebecers entered 2023 with their belts tightened. As such, many have had to adjust their budgets and put their dreams of home ownership on hold until their financial situation has settled. This is not surprising, since with rising prices and increasingly precarious finances, the purchasing power of potential buyers is reduced.
However, 2023 could give a second wind to many, with the government's goal being to bring the inflation rate down to an average of 2-3% from the current average of 5.1%.
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