The organization representing Canada's 150,000 real estate agents expects 2023 will see housing prices stabilize, a forecast that comes as the Crown corporation that advises the federal government predicts new construction of condominiums, apartments and houses is falling short of population needs.

The Ottawa-based Canadian Real Estate Association expects the average existing home sales price across the country this year to drop to $662,103, down 5.9% from a year earlier. Still, the decline is primarily attributable to the fast start that occurred a year ago as the market peaked during the first months of 2022.

"With the shock from the Bank of Canada's efforts to control inflation fading, and uncertainty about the path for housing markets and where borrowing costs will ultimately land also likely to wind down over the next few months, the theme of our 2023 forecast is not recovery, but the start of a turnaround," said CREA in a statement.

CREA is predicting a modest 0.5% decline in sales activity this year.

Canada's central bank is meeting on Jan. 25, and some economists are forecasting another 0.25% increase in the overnight lending rate, which would immediately affect anyone with floating rate debt.

New Housing Construction Slowing

Canada Mortgage and Housing Corp. reported this week that new home construction across the country slowed in December to 248,625 units on a seasonally adjusted annualized basis but finished the year historically high.

"The rate of new construction continued at an elevated pace in 2022 overall, ending the year with actual total urban starts at 240,590 units," said Bob Dugan, chief economist of the Crown corporation, in a statement that noted total actual starts in urban centres dropped 1% from 2021.

"While these additional units will provide much-needed supply on the market, demand for housing in the country will continue to grow. We need to find innovative ways to deliver more housing supply and keep building at a higher pace in the coming years in order to improve affordability."

The Toronto area recorded its highest number for new construction since 2012 at 45,109 units, driven mainly by multiunit starts, with the majority of that construction being condos, which could end up in the apartment stock.

"Growth in Canadian home sales and average home prices should return to positive territory, on an annual average basis, in 2024. By then, inflation should be contained, and the Bank of Canada is expected to have moved rates away from restrictive territory. At the same time, the economy should begin to heal after a weak performance in 2023, with continued robust population growth," said the bank in its report.