After a year of rapidly rising interest rates and falling home prices, 2023 should see more balanced conditions return to most housing markets across the country.

Re/Max Canada forecasts that national prices will fall by a modest 3.3% in 2023 compared to 2022 values. However, certain regions are expected to see sharper declines than others, according to Re/Max’s 2023 housing market outlook, based on survey results from brokers and agents.

Overall, roughly 60% of the country’s housing markets should see a return to balanced conditions in the new year. The trend is already starting to materialize in many regions as a result of current economic conditions, the report noted.

“It’s good to see the majority of markets moving toward more balanced conditions, which is typically defined by 45 to 90 days on the market,” Re/Max Canada president Christopher Alexander said in a statement. “This is a much-needed adjustment from the unsustainable price increases and demand we saw early in 2022.”

Housing market performance will vary by region

The decline in prices in the latter half of 2022 and those that are forecast for 2023 follow a run-up in prices that occurred during the pandemic and into early 2022.

As a result, many markets still posted year-over-year gains in 2022. In the Greater Toronto Area (GTA) for example, the average price of a home rose 11% to $1.2 million for the period January-October. Those gains on set to be erased in 2023 with an expected 11.8% decline in prices by the end of 2023, Re/Max said.

In Vancouver, prices climbed 8% to $1.3 million during the same time frame in 2022, which is expected to be followed by a 5% reduction in 2023.

Smaller cities in B.C. such as Kelowna and Nanaimo also saw significant price increases of 17% and 18%, respectively, between 2021 and 2022. According to Re/Max data, the average sale price in both cities could fall by 10% by the end of 2023.

In Ontario, some markets in and around the GTA are forecast to drop between 3% and 15%, including in Barrie (-15%), Durham (-10%), Kitchener-WAterloo (-6%) and Lakelands West, which encompasses Ontario’s Collingwood and Georgian Bay areas, (-11%).

Elsewhere in the country, Re/Max is forecasting an 8.5% year-over-year decline in prices in Winnipeg, a 5% decline in Montreal, and a 5% decline in Saint John, NB.

Other regions will see prices rise in 2023

By contrast, home prices in some regions could stage a rebound. Of the 21 Ontario regions listed in the Re/Max report, over half were expected to see price increases in 2023, ranging from as low as 2% in Oakville to 8% in Muskoka.

Outside of Ontario, price increases are in the forecast for Halifax (+8%), Calgary (+7%), St. John’s, NL (+4%), Edmonton (+3%) and Saskatoon (+3%).

On the whole, Re/Max says Canada’s major cities are expected to become balanced markets with fewer sales and modest declines in year-over-year price growth. Existing homeowners in nearly all markets are expected to drive the majority of homebuying activity with the exception of Ottawa and Calgary, Re/Max says, “where first-time buyers are expected to lead.”

Yet, in spite of Canada’s increasing housing unaffordability, not to mention interest rate hikes and ongoing inflationary woes, many Canadians continue to see homeownership as an aspirational goal.

Nearly three-quarters (73%) of Canadians believe having their own place is the best long-term investment they can make.

With housing unaffordability as one of the most important issues for Canadians right now, Alexander says policymakers need to step up and improve access to housing.

“As we head into the new year, it’s important that governments work collaboratively to support housing affordability and address the supply challenges that Canadians continue to face,” Alexander says, “in order to make homeownership feasible for those who want it.”