While home prices have dropped nine months in a row, many Canadians are still struggling to jump into the housing market amid high interest rates and low supply.

But real estate experts are flagging that there could soon be a number of material changes in the Canadian housing market just around the corner.

“I think the first and perhaps most important trend that we will see this year will be the transition from a rising interest rate environment, to a no news state as it relates to rates,” said Phil Soper, chief executive officer of Bridgemarq Real Estate Services and Royal LePage, in a phone interview on Tuesday.

“So I'd say the move to a stable rate environment, even though it's at a higher level than it has been during the pandemic, will be the first step in reviving consumer confidence,” Soper said.

In December, the Bank of Canada hiked its key policy rate for the seventh time in a row, to 4.25 per cent.



John Pasalis, president and broker at Realosophy Realty Inc., said he thinks housing prices will continue to fall amid this high-rate environment.

“I think the main trend this year is probably going to be continued downward pressure on housing prices. I think that's the most likely event and I don't think the market has really absorbed higher rates yet,” Pasalis said in a phone interview on Tuesday.

“We haven't seen much distress from sellers yet, but it's still early. As we move into the new year, sales are going to remain slow and we're likely going to start to see a little bit more distress from sellers.”

The Canadian Real Estate Association reported home sales fell for the ninth straight time in November.

The actual national average home price was at $632,802, which was down 12 per cent from the same month a year ago.

But Jason Mercer, chief market analyst at the Toronto Regional Real Estate Board, said he thinks there could be some good news on the horizon for homebuyers.

“We're starting to see a flat lining in terms of prices and I think that trend is going to carry forward through the first half of 2023, give or take,” Mercer said in a phone interview on Tuesday.



Some real estate experts are warning there could be a surge of homebuyers ready to jump into the market, as many individuals were sidelined over the past few years amid higher rates and elevated prices.

“The pent up demand that that occurred in 2022, it's significant. Add to that a record number of new residents immigrating to Canada last year,” Soper said.

On Tuesday, Immigration, Refugees and Citizenship Canada said the country added more than 431,000 new permanent residents in 2022.

This marked the largest annual increase of residents, breaking the prior year’s record of around 401,000 newcomers.

In the report, it said that “immigrants account for 36 per cent of physicians, 33 per cent of business owners with paid staff, and 41 per cent of engineers.”

Mercer said a lot of these skill sets match up with the high demand for jobs in the Greater Toronto Area (GTA).

He explained that many people could be moving to this region over the next few years and they will need to find a place to live.

“I think that (higher immigration levels) certainly suggests we'll see a tightening in the ownership market (in the GTA) over the next couple of years that would support renewed price growth,” he said.

“I think we're also going to continue to see strong growth in average (GTA) rents as well.”



Experts are flagging that there could be a spotlight on condominium properties this year.

Soper said there was a hyper-focus on detached homes during the pandemic, but he sees that changing in the coming months.

“We see that flipping to a focus on condominiums in 2023 because they're more affordable, investors are able to achieve outsized-returns because of the sharp rise in in rental prices and because of immigration,” he explained.

“Our research shows that for the first three years of their (immigrants’) time in Canada, almost all new Canadians rent condominiums, so all of that should put focus on condominiums versus detached housing.”

Pasalis said condo prices have been more stable than low-rise properties over the past few years but he thinks prices could drop even further as we “haven’t seen distressed condo sellers yet.”

“If investors get distressed, a lot of these condo properties are owned by investors so depending on their leverage we could start to see some properties selling,” he explained.

“But I don't think it's going to be a disaster because I think the flip side is that the rental market is still quite strong and that is definitely helping the condo market.”