TD Economics Provincial Housing Market Outlook: Gauging the Timing and Strength of Recovery

After a dramatic slide over the past year, Canadian home sales appear to have reached a trough and TD Economics is now forecasting quarterly sales gains through 2023, with stronger growth expected in the year’s second half.

Nationally, the bank is forecasting year-over-year sales to fall by 15.5 per cent this year while average home prices are expected to drop by 10.8 per cent.

Home Sales and Price Outlook

[Annual Average Growth, %]

Source: CREA, CMHC, TD Economics. Forecasts by TD Economics as of April 2023.

Provinces	Home Sales			Average Home Prices
	2022	2023F	2024F	2022	2023F	2024F
National	-25.2	-15.5	13.3	0.8	-10.8	2.7
Newfoundland & Labrador	-7.1	-6.0	4.9	7.1	1.1	2.4
Prince Edward Island	-18.1	-15.3	16.2	13.8	-5.4	0.2
Nova Scotia	-21.7	-19.1	7.8	13.6	-6.3	0.2
New Brunswick	-20.4	-13.7	9.5	16.8	-6.7	0.3
Québec	-20.4	-20.5	6.7	9.3	-4.2	1.8
Ontario	-32.3	-8.1	18.0	4.5	-13.3	0.8
Manitoba	-20.1	-10.5	10.1	6.9	-5.4	2.1
Saskatchewan	-11.7	-16.6	5.0	0.1	-2.2	3.1
Alberta	-1.9	-23.9	7.2	4.8	-4.2	2.6
British Columbia	-35.2	-19.0	18.6	5.3	-12.2	0.8

“Underpinning this forecast is our view that sales have likely undershot levels consistent with fundamentals –such as income and available housing supply – and are now closing that gap. In addition, in the near term, tight job markets should spur continued income gains, even as economic growth and hiring slows, and lower bond yields should offer some respite from stretched affordability conditions across Canada,” said the report.

“Ontario and B.C. are poised to record the strongest quarterly sales growth this year. This shouldn’t be taken as a sign of strength, however, as 2023 will likely be the softest sales year since the early 2000s in both provinces. Similar quarterly growth patterns are expected elsewhere in Canada in 2023, although sales levels should stay comparatively elevated in the Prairies.

“For 2024, we see the sales recovery continuing across the country despite a general rise in unemployment rates.  Supportive factors will be cuts to interest rates and continued robust population growth. However, a tough affordability backdrop will likely limit the strength of the recovery, and we expect sales to remain below pre-pandemic levels through 2024.”

In contrast to sales, TD said it thinks Canadian average home prices have some modest downside left and are forecasting a bottom in the second quarter of 2023.  This largely reflects developments in Ontario and B.C., where looser-than-normal conditions are expected to maintain downward pressure prices. All told, Canadian average home prices will have likely fallen by 21 per cent on a peak-to-trough basis, retracing less-than-half of the 47 per cent gain recorded during the pandemic. In the second half of this year, and through 2024, subdued sales activity should restrain quarterly price growth to a below average pace, it said.

(Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He worked for 35 years at the Calgary Herald, covering sports, crime, politics, health, faith, city and breaking news, and business. He works as well as a freelance writer for several national publications and as a consultant in communications and media relations/training. Mario was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list)