Anticipated drop in property prices: How will this impact the real estate market?


Many are buzzing about a correction in real estate prices expected across some key markets in Canada.

RBC anticipates a correction of 20% over the next year; and, BMO Capital Markets projects an even higher percentage. These forecasts are far from the 12% presented by Desjardins this past Spring.

These analyses include the cities of Toronto and Vancouver, where the most significant price drops are anticipated.

In Quebec, according to the data published by the RBC, prices could rise by 7.5% in 2022, and then correct downward by 5.1% in 2023.

However, in the event that interest rates were to remain as is, or increase slightly, real estate prices would possibly stagnate, rather than drop.

Is this decline real?

Let’s put things in perspective. 

According to the QPAREB (Québec Professional Association of Real Estate Brokers):

The median price of single-family homes in Quebec was $265,400 in the second quarter of 2019.

In 2022, this figure will reach $448,600.

This represents an increase of 69%. 

Now, let’s imagine that real estate values decrease by 20% by 2023. The median price of single-family homes would then drop to $359,000, a drop of almost $90,000. However, even after such a correction, real estate would be up 35%, for the period we refer to. 35% more expensive than it was in the second quarter of 2019. 

Bottom line: No real negative change in value for the vast majority of homeowners, or investors. Prices simply climbed too quickly, over a very short period of time. However, the homeowner, or investor, with a correct approach to real estate, as a long term investment, yielding better than most investment avenues, will continue to see growth and gains as required for a healthy return.

So who might really be at risk?

Those who bought at the peak of the curve last spring?

To a certain extent; but, as long as these new homeowners continue to pay down their mortgages, it is not really a problem, and the only real sting for them is having bought at a high price. The long term prospects are, as one would expect from historical data, positive.

Also: For those who opted for a fixed rate, it’s all smooth sailing for now, until they review their rates in 4 or 5 years, and make an informed decision as to the fixed/variable question based on market conditions/rates at that time.

For those who opted for a variable mortgage: It is not the cooling of the market that poses the most serious risk, but rather the short-term trend towards rising interest rates, which may directly affect their monthly expenses.

The more stressful cases currently, may be amongst those who recently bought a property but for some reason feel they must quickly let it go. For them, possibly some losses could be incurred.

For first time buyers, what to do?

Access to the real estate market remains unattractive, with rising interest rates. Prices will have to come down to compensate for higher financing costs. Once we reach the bottom of this corrective curve, first-time buyers can look forward to a more approachable market.

In the meantime: The take-away from the current economic climate is that all real estate transactions require preparation. Call your broker and ask your questions. Your broker’s primary mandate is to advise you, and to help you to develop a plan of action, which will best execute your real estate project, according to your specific needs and circumstances.

The current economic terrain should not be seen as synonymous with anxiety. Opportunities are out there today, and tomorrow. You need to know what you can, and what you should do; and, most importantly how to think about time and growth in real estate; whether as home, or as a tool for financial advancement, or both.

Our team of experts remains available for all your real estate needs.

References (available from the sources in French only):

Quels seront les impacts d’une baisse du prix de l’immobilier, Daniel Germain, Le Journal de Montréal

Correction attendue sur le marché immobilier, La rédaction, Conseiller

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