The current wave of economic uncertainty does not seem to be drowning Canadians’ optimism about the housing market.
The annual Canadian Real Estate Industry Trends Report from Re/Max suggests nearly one-third (32%) of Canadian home buyers and sellers have a positive sense that the market could become more balanced this year.
There are, of course, concerns. Inflation and the cost of living weigh on the minds of 34% of Canadians. Closely related to that, 25% are worried about housing affordability, according to the report.
Affordability has become a persistent source of anxiety even though the analysts continue to predict ongoing home price declines. The latest report from Fitch, the global credit rating agency, is forecasting a further 5% to 7% drop in Canada. Despite that, Fitch says prices remain 20% above pre-pandemic levels and are likely to remain elevated because of high demand and low supply. Separately, higher interest rates have been a key factor in lower affordability.
There have been suggestions that the affordability problem may be exacerbating itself. Canada Mortgage and Housing Corporation recently reported a 13% decline in housing starts between December 2022 and January 2023. At least some of that is thought to be the result of developers putting projects on hold until market conditions improve.
The Re/Max report indicates two-thirds of Canadians believe governments should take action to address affordability and supply issues. It also suggests 22% of Canadians would like to see new building that fills in the, so-called, “missing middle” in the country’s housing market.