Why a Decline in Canadian Real Estate Prices Could Be Good for Sellers

The Canadian real estate market is going through an adjustment period right now. After a couple of years of meteoric growth across the entire housing sector, conditions seem to be settling, the frenzy is coming to an end, and Canadian housing markets from coast to coast are returning to equilibrium.

According to the Canadian Real Estate Association (CREA), residential property sales have tumbled nearly 40 per cent from a year ago, while the benchmark MLS® Home Price Index (HPI) has slumped more than four per cent year-over-year. Indeed, the national average home price was about $632,000 in November, down 12 per cent from the same time in the previous years. When the Greater Vancouver Area and the Greater Toronto Area are removed from the equation, the typical home sells for a little over $500,000. This is a complete retreat from the peak of above $800,000 in early 2022.

So, what is happening exactly? First, the Bank of Canada (BoC) has been raising interest rates, a tightening cycle that has lifted mortgage rates. Second, there has been a great deal of uncertainty in the housing market and the broader economy. Third, many households have exhausted their pandemic-era savings, and inflation has diminished their purchasing power.

Ultimately, the Canadian real estate market is slipping into balanced territory because of the latest developments nationwide. A new REMAX Canadian Housing Market Outlook for 2023 suggests that more than half (55 per cent) of housing markets in Canada will return to balance or even shift into a buyer’s market this year. As a result, the national average price is forecast to slide 3.3 per cent in the upcoming year.

“Amid rising interest rates and a looming recession, RE/MAX Canada is anticipating a modest decline of 3.3 per cent in average residential sales prices across the country in 2023. The estimates are based on surveys of RE/MAX brokers and agents from coast to coast,” the report stated. “In sharp contrast to 2022, most regions analyzed in the report will experience more balanced conditions in 2023 – a trend that’s already starting to materialize as a result of current economic conditions.”

But while all the talk is that this is advantageous for prospective homeowners, what about sellers? Is this type of environment beneficial for sellers?

Why Current Conditions in the Canadian Real Estate Market Could be Good News for Sellers

So, what exactly is a balanced or buyer’s market anyway?

A balanced market is when the supply of residential properties meets the level of demand. A buyer’s market is when there is a greater inventory of homes than the number of buyers.

Now, it is crucial to understand how these types of climates work:

• Buyers will possess more leverage and may be able to negotiate prices (much different from years past!).
• Your home may sit unsold longer than you may anticipate.
• You might need to lower the price from your initial asking.

With prices expected to fall further in 2023 and conditions tilting in favour of buyers, where is the good news for sellers?

First, this figure is a national average and may be higher or lower depending on where you are located. So, for example, if you are selling your single-family home or townhouse in the Calgary real estate market, the sale price is expected to rise seven per cent in 2023. Meanwhile, if you are listing your home for sale in the Ottawa real estate market, prices are expected to rise four per cent this year. Also, it should be noted that the national outlook of -3.3 per cent is lower than what transpired in 2022, meaning that the downturn or correction may have already reached its peaked.

Second, if you are selling your home, you will also need another place to hang your hat once the transaction is completed. Therefore, if you take the equity and purchase another residence, you will not have to endure the frenzy and panic of a seller’s market.

Finally, a balanced market does not mean you will need to give away your home for a 20-per-cent discount. But you might need to employ a few additional measures to attract buyers. Here are several suggestions:

• Always work with a real estate agent.
• Be sure that your home is in tip-top shape and have your home inspected before a For Sale sign is erected on your front lawn.
• Make your front and backyard presentable; enhance your home’s curb appeal.
• Ensure that you clean your house of clutter.
• Add a couple of incentives, such as new appliances.

Remember, there is still demand for housing. With interest rates increases eventually coming to a stop, home buying is expected to pick up again, especially as immigration levels grow. Put simply, the competition for real estate in Canada will likely be revived.

“Canadians are understandably hesitant to engage in the market early in 2023. Despite this, more Canadians see real estate as a solid long-term investment when compared to this time last year,” said Christopher Alexander, the president of RE/MAX Canada.