Hoping for a steep drop in home prices next year? It’s unlikely, Royal LePage says

Housing prices are only forecasted to drop one per cent in 2023, according to a new market survey forecast from Royal LePage.

The aggregate price of a home in Canada is set to drop just one per cent year over year from $772,900 to $765,171, the survey is projecting — something that might disappoint hopeful homebuyers who expected rising interest rates to push down housing prices.

“Typically what we see at this point in the market correction is demand falls, and with that, people who want to sell their homes need to sell them at a discount — prices drop,” said Phil Soper, CEO of Royal LePage, in an interview with Global News.

“But in fact, we’ve seen demand fall and the number of homes available for sale to fall absolutely in concert.”

As a result, he said, there’s “no real change” in the number of people looking for a home, nor are there any major changes in the number of homes available for sale. Taken together, Soper explained, that means no big changes are expected in housing prices.

Rising interest rates, which have hit Canadians’ mortgages, have also faced counterbalances that reduce their impact, Soper added.

“We all know that the cost of borrowing has risen rapidly. But there’s a number of factors actually supporting home prices on the other side of the equation,” he said.

“Incomes are actually getting a little higher. Inflation is pushing out, pushing up salaries. People are working. Unemployment is very, very low by historical standards. Homes are a little bit cheaper.”

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On top of that, savings are still “about three times higher than normal,” Soper said.

“People have money for down payments, they have more disposable income because of salary increases, and those homes are a little cheaper than they were a year ago. So you add all that up and it offsets a significant amount of the increased cost of borrowing.”

Some onlookers who were hoping to see home prices drop steeply might find themselves “disappointed,” Soper said.

In fact, some kinds of housing are actually projected to increase.

While single-family detached housing is expected to drop two per cent year over year from $797,200 to $781,256, city slickers hoping to save some money by purchasing a condominium will find themselves paying more in 2023 than they did in 2022, the forecast suggests.

According to Royal LePage’s 2023 forecast, condominium prices will increase by one per cent year over year, from $563,300 to $568,933.

“We are seeing a material difference in the outlook for condominiums and detached homes. The condominiums are being bid up in value, I think, both because there is a return to that joy of urban living,  where that definitely was out of style during the height of the … pandemic lockdown,” Soper said.

“So there’s been a complete 180-degree turn over the last 24 months, in terms of what kinds of properties are favoured by homebuyers in the country.”

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Prices also aren’t dropping at all in some cities, including Ottawa, Calgary and Halifax — which are all cities that are seeing small upticks in prices for all forms of housing.

Renters will also continue to feel the pressure, Soper added.

“The price of renting accommodation in this country has really skyrocketed,” he said.

“So the math isn’t working for people who are looking to get out of homeownership.”

What owners are continuing to do, however, is move to areas where they can cut down other expenses.

“What we are seeing is more migration from areas of high cost of living, say southern Ontario,” he said, “to areas of low cost of living that was triggered during the pandemic to move, say, to Atlantic Canada or the Prairie provinces.”