The downfall of estate market is not finished. However, it should prove to be a little less severe in Quebec and stop before it has had time to erase all the gains made during the pandemic.
In June, at the time of publishing their forecasts on the housing market in Canada, Desjardins Group analysts were told that they saw the future a little too dark.This weekjust two months later, they were forced to admit they were probably wrong… and issued an even bleaker forecast.
So instead of an average decline of 15% in property prices in Canada, from its peak in February 2022 to somewhere towards the end of 2023, they now expect a fall of almost a quarter (23%). . Quebec will fare better—particularly because prices andindebtedness remain proportionally lower there and that wages increase there more quickly — but it will not be spared. From only 2% so far, the slide will not stop at 12%, as was still thought at the beginning of the summer, but could go up to 17%.
But here again, not everyone will be in the same boat. Some regions, such as Quebec City, could remain more or less intact, while others, such as Greater Montreal, could witness a total decline in prices of at least 20%.
The number of homes sold (-17% this year and -17% in 2023 in Quebec) should follow the same trajectory, as will the number of housing starts (-11% and -22%), although, in the latter cases, at a very different pace for single-family homes (-34% and -36%) and condominiums (-13% and -21%).
The latest housing market boom couldn’t last forever. In a situation of shortage amplified by an explosion in demand for larger housing away from city centers triggered by the coronavirus pandemic COVID-19, Canada finally saw supply come back into balance with demand. We should eventually see surplus situations emerge in certain places over the next few months.
Thus, instead of the stories of overbidding in recent months, we could see properties sold below the asking price, observed Thursday the economists at Mouvement Desjardins Hélène Bégin and Chantal Routhier, in an analysis of the Quebec and Ontario markets. “This is a 180 degree turn from the recent frenzy. »
This reversal of the situation is accelerated by the much sharper-than-expected rise in the interest rates of the Bank of Canada. Still at its lowest level of 0.25% in March, its policy rate is 2.50% today and should be at 3.25% or 3.50% before the end of the year, depending on which analyst you talk to.
This increase in the cost of money does not only affect mortgage rates, it also raises the income thresholds that borrowers must have in order to be able to take out a loan from their bank and reduce the sums that the latter will be ready. to advance to them.
We are witnessing “the worst deterioration in housing affordability in 41 years”, National Bank analysts said on Tuesday. “The typical home mortgage in Canada now requires 63.9% of income to be paid off, the highest percentage since 1982.”
Until 2024
Some owners may decide to renovate the house they already have rather than change it, especially since the 40% increase in the cost of this type of work last year has a little attenuated since, at the same time as the price of building materials. But the increase in borrowing costs will weigh there too, warn Hélène Bégin and Chantal Routhier. Many other households will be condemned to remain tenants longer than desired, which will also weigh on the price of rents (+4.8% this year and +5.5% in 2023 in Quebec).
This period of housing market cooling will last until the Bank of Canada feels compelled to ease monetary restraint again to breathe some more life into the economy, which should happen towards the end of the year. next year, predicts Desjardins.
Even then, homeowners will not have lost all the ground gained during the pandemic. The average property price at the end of 2023 in Quebec should still be about 20% higher than it was in February 2020.