However, improvements in affordability will be subject to significant regional disparities, new report says
While rate hikes will continue to weigh on purchasing power and borrowing prices, housing affordability will likely improve next year, albeit with some notable regional differences, according to a new analysis by Desjardins.
“As interest rates continue to move higher and the impact of past rate hikes increasingly weighs on growth, we expect further weakness ahead,” Desjardins said in a new report. “This will be a marked drag on growth and will combine with slower consumer spending and global economic challenges to push the Canadian economy into recession in the first half of 2023.”
However, the regions that saw the most significant price surges during the pandemic will also undergo the sharpest price corrections in 2023. These include the areas surrounding Toronto, Vancouver, and Montreal, along with the Maritime provinces, Desjardins said.
Still, Desjardins warned that these markets will not necessarily be the areas with the largest improvements in affordability.
“In cities that saw the greatest erosion of affordability … we think it’s unlikely that they’ll get back to those pre-pandemic levels over the next couple of years,” said Randall Bartlett, senior director of Canadian economics at Desjardins.
“We expect Canadian housing to remain less affordable than it was before the pandemic,” the report stressed. “Efforts to boost supply must be maintained to accommodate Canada’s fast-growing population without generating new froth.”
Desjardins pointed at Edmonton, Calgary, and Winnipeg as the markets that will likely see the greatest improvements in affordability next year.