Home sales expected to drop by one quarter in 2022: TD

A new report from TD says home sales in Canada could fall by almost a quarter on average this year and remain low in 2023.

The report, prepared by TD Economics and released on Wednesday, said the bank had “significantly downgraded” home sales and price forecasts from March “as monetary policy has tightened compared to guess.”

TD Economics thinks rising borrowing costs will “hit housing activity hard”, with peak-to-trough declines, or business cycle highs and lows, in the first quarter. from 2022 to 2023 will reach 33%.

The report said housing activity would start to “solidify” beyond that, but remain low as interest rates fall.

This would cause Canada’s average annual home sales to fall 23% in 2022, before pulling back to an average decline of 11.9% in 2023.

Average home prices in Canada between the first quarter of 2022 and 2023 will also fall due to lower demand, with TD Economics forecasting a peak-to-trough decline of 19%, followed by growth humble.

The report comes after a series of rate hikes by the Bank of Canada amid record inflation.

The bank raised its prime rate by 50 basis points, or half a percentage point, to 1.5% in June.

The bank previously raised key interest rates in March and April, with the next rate announcement scheduled for July 13.

A report by TD Economics said it expected the base rate to hit 3.25% by the fourth quarter of this year.

Bank of Canada deputy governor Paul Beaudry said last month the key interest rate could rise above its previous target of 3%.

The TD Economics report also analyzes average year-on-year growth and declines in home sales and prices by province, with BC and Ontario expected to see some of the biggest declines in 2022. and 2023, which TD Economics says is a reflection of “a substantial decline in affordability during the pandemic.”

Quebec will see similarly modest price growth, with sales in Alberta expected to be “significantly down from their record highs”, but still close to pre-pandemic levels to come. in 2023 compared to BC and Ontario.

“Prices should outperform elsewhere in Canada, provided that the best affordability in the country is comparable to other markets in the Prairies and Newfoundland and Labrador,” the report said. know.

“Strong population growth and tightening conditions should provide near-term price support for the rest of the Atlantic, although activity in this region should ease as rates move higher.”

A report released by Desjardins last month found that house prices in Canada could fall 15% to around $675,000 by December 2023, down from an average of just over $790,000 in February 2022.

Even so, Desjardins said $675,000 is still nearly 30% more than in December 2019, when the median home price in Canada was $530,000.

With files from CTV News and The Canadian Press

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