Canadian Housing Sales Continue to Fall as More Newcomers Arrive Looking to Buy

Newcomers to Canada keen to buy a home got more good news in November as housing prices across Canada continued to fall.

And according to a report from the Canadian Real Estate Association (CREA), seasonally adjusted home sales were down 3.3 percent on a month-over-month basis in November.

The drop in sales in November wiped out the gain seen in October, and sales are back in line with the overall trend lower for the year.

"Home sales activity slowed down again in November," writes Scotiabank Housing Economist Farah Omran in her monthly housing report,  "resuming a trend of declining sales after a pause in October following seven months of consecutive declines after the Bank of Canada began its hiking cycle alongside worsening economic conditions."

Falling prices (and sales) certainly appeal to the ever-growing number of immigrants who, according to reports, are buying homes more quickly than ever before. 

An Ipsos Public Affairs survey released earlier in 2022 showed that newcomers to Canada are looking to buy their first new home faster than ever. 

The study also showed that immigrants to Canada typically are homebuyers within their first five years of arriving and are more focused on owning a home than non-newcomers.

Canada admitted a record-breaking 431,000 new permanent residents to Canada in 2022.

The country now hopes to land 465,000 new immigrants in 2023. That number will rise to 485,000 newcomers in 2024 and will jump in 2025 to 500,000 new arrivals. The majority of new arrivals come from India, the Phillippines and  China.

And the most recent census showed that immigrants comprise, at 23 percent,  their largest-ever share of the country's total population. That breaks the record established 100 years ago.

So, the question for newcomers eyeing the housing market is, when will the market bottom out?

Prices will definitely continue to fall, reports Better Dwelling contributing editor Daniel Wong. 

Credit rating giant Fitch Ratings released its 2023 forecast,  writes Wong,  predicting even lower home prices in 2023. 

"After 3-decades of strong price growth without correction, affordability has never been worse. When combined with high rates, weak demand is expected in the near term as home prices adjust. The market cooling is also expected to produce a sharp increase in delinquencies."

Toronto sales tumbled hard in 2022

A report from the Toronto Regional Real Estate Board (TRREB) shows that December home sales in the Toronto real estate market were down 48 percent year-over-year, while total yearly sales were down 38.2 percent compared to the 2021 peak of 121,639. 

The report blamed the Bank of Canada’s consistent interest rate increases for worsening an already-existing affordability problem brought on by an inventory shortage.

However, the same report reveals that even with a 10-month-long market downturn, the average home price in the Greater Toronto Area for all of 2022 remained up 8.6 percent from 2021.

Prices drop hard in Kitchener-Waterloo

The most recent CREA report shows that Ontario has experienced the largest percentage point drop from the housing price peak. Single-family homes dropped the most in Kitchener-Waterloo (-27.7 percent), with Cambridge at -27.0 percent and London-St. Thomas at -26.7 percent. 

It's estimated by Better Dwelling that the declines in these markets amount to at least $223,600 in lost equity. 

Still, population growth, predicts Omran, will definitely have a profound effect on the housing market going forward. 

any recent improvement in supply-demand imbalances in Canada’s housing market will be reversed if no progress is made to increase the housing supply stock - Farah Omran, Scotiabank

She points out that 2021 was the weakest in Canada’s modern history regarding population growth, which was effectively zero. 

"The softness" in the market so far this year, says Omran is also partly the result of the "buying frenzy" by  Canadians who rushed to buy homes in 2021 and who normally would have bought this year and next.

Ottawa's immigration targets will have an impact

She predicts that as population growth rises due to Ottawa's higher immigration targets with a continued focus on economic class admissions and the rising share of newcomers to fulfill them, housing demand will also rise.

 "This means any recent improvement in supply-demand imbalances in Canada’s housing market will be reversed if no progress is made to increase the housing supply stock," writes Omran. 

A recent Zoocasa year-end report agrees. 

As Zakiya Kassam reports in storeys.com, "in stark contrast to the buying frenzy that defined the 2021 housing market, many Canadians chose to shelve their home-buying plans in 2022, even when home prices began to deflate in some areas. But in 2023,  Zoocasa expects that those same buyers will consider jumping back into the market."

Lauren Haw, CEO of Zoocasa, predicts it will be “the year of the sideline buyer.”

Immigration to drive demand over the next two years

“Many prospective buyers chose to wait on the sidelines while interest rates rose, but whether they were planning to move because they wanted a bigger home, a new neighbourhood, to be closer to the office, they likely still need to move,” Haw told Kassam.

The Zoocasa report also cites the impact that surges in immigration will have on the housing market. 

“Although the effects may be delayed, the added pressure on housing markets will be felt in the next two to three years,” says Haw. 

"Chronic challenges facing Canadian housing, such as supply shortfalls and already-pent-up demand, will likely exacerbate the pressures felt by both major and smaller markets."