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Saturday, August 13, 2022

TD “significantly” lowers its predictions for home sales and prices

TD 'significantly' lowers property sale and price projections

Key Takeaways:

  • Recent TD analysis indicates that the typical number of homes sold in Canada could decrease by around 25% this year and remain low until 2023.
  • As a result, the average yearly fall in Canadian home sales will reach 23 percent in 2022 before leveling off at 11.9 percent in 2023.
  • According to Desjardins, the national average home price was $530,000 in December 2019, and $675,000 signifies a price rise of about 30%.

According to recent TD research, the average number of homes sold in Canada could drop by about 25% this year and stay low until 2023.

According to the TD Economics study, which was created and released on Wednesday, the bank has “substantially” lowered its predictions for home sales and prices compared to those made in March “as monetary policy has tightened more acutely than anticipated.”

According to TD Economics, rising borrowing prices will “heavily weigh on housing activity,” with the peak-to-trough decline—the difference between the greatest and lowest points in the business cycle—falling by 33% during the first quarters of 2022 and 2023.

Beyond that, housing activity should be “firm,” according to the research, but it will still be very low.

As a result, Canadian home sales will experience a 23% annual average decline in 2022 before stabilizing at an 11.9 % annual decline in 2023.

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Cooler demand might cause a decrease in average home prices in Canada between the first quarters of 2022 and 2023 as well; TD Economics anticipates a peak-to-trough reduction of 19%, followed by a modest rebound.

The news comes after the Bank of Canada raised interest rates several times in response to unprecedented inflation.

In June, the bank increased its benchmark interest rate by 50 basis points, or 0.5 percentage points, to 1.5%.

In March and April, the bank increased its benchmark interest rate; the following rate announcement is anticipated for July 13.

According to the TD Economics analysis, the key interest rate is predicted to reach 3.25 percent by the 4th quarter.

Paul Beaudry, the deputy governor of the Bank of Canada, stated last month that the key interest rate might increase over the prior objective of 3%.

TD 'significantly' lowers property sale and price projections
TD ‘significantly’ lowers property sale and price projections. Image from CBC News

The TD Economics report also breaks down the average annual growth as well as the decline in home sales and also prices by province, with B.C. and Ontario anticipated to experience some of the largest declines in 2022 and 2023 due to “significant affordability deteriorations during the pandemic,” according to TD Economics.

Sales in Alberta are anticipated to “retrench significantly from their record highs” but continue to be closer to pre-pandemic levels through 2023 compared to B.C. and Ontario. Quebec will experience a comparatively minor price growth.

According to the analysis, the best affordability circumstances in the nation will cushion other markets in the Prairies, Newfoundland, and Labrador. Prices should hold up better elsewhere in Canada.

Although activity in this region might slow as interest rates rise, “strong population growth and tight conditions should offer near-term pricing support to the remainder of the Atlantic.”

According to a Desjardins analysis released last month, housing costs in Canada might decline by 15% to around $675,000 in December 2023, from an average peak of just over $790,000 in February 2022.

Despite this, Desjardins notes that $675,000 represents a price increase of roughly 30% over December 2019, when the national average home price was $530,000.

Source: CTV News

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