The real estate market: 2022 retrospective and 2023 outlook
The Quebec Professional Association of Real Estate Brokers (QPAREB) recently unveiled its 2022 report and 2023 outlook on the residential real estate market for the province of Quebec and its various regions.
Record high prices, overheating, overbidding, rising interest rates, and inflation: the residential real estate market has changed significantly in the past year. But what is in store for 2023?
A look back at a pivotal year
All property categories experienced record high median prices in 2022. The single-family home tops the list with a median price of $415,500, an average increase of 14 per cent from the previous year. After reaching remarkable levels, sales nevertheless experienced a 20 per cent drop. According to Centris.ca – the platform used by Quebec real estate brokers – 88,000 transactions were concluded over the year, well above the averages of the past ten years.
Moreover, the fall in the number of buyers in several of Quebec’s regions resulted in an easing of overheating and overbidding conditions. It should be noted that Greater Montreal and surrounding areas were particularly affected by this reality in both 2021 and 2022.
According to Charles Brant, QPAREB market analysis director, the exceptional scale of the rise in interest rates has upset all forecasts. For instance, the key rate increased by four percentage points in less than ten months, primarily due to inflation and the outbreak of the conflict in Ukraine.
The second part of the year, meanwhile, saw a major turnaround due to rising interest rates and the inability of some buyers to obtain a mortgage. This situation has also resulted in a price correction – to the delight of some buyers – as well as a decline in activity.
Despite a marked slowdown in sales, residential real estate market conditions remained favourable to sellers. “The drop in sales has resulted in an increase in active listings, i.e., the number of properties on the market that have not found a buyer. This reversal
in the trend has been taking place since the second half of 2022 and indicates a turning point in an upwardly trending real estate market cycle,” explains Brant.
Accordingly, listings have remained at historically low levels, and the number of months required to sell the inventory of properties is still below the balanced market threshold. Everything suggests that the market is entering a slowdown phase. Moreover, the return to more balanced conditions between buyers and sellers may take some time.
What’s ahead in 2023: a more balanced market that will be slightly favourable to sellers
In 2022, rapidly rising interest rates combined with record high prices generally exacerbated homeownership difficulties. However, some regions have proven to be more resilient in the face of these challenges. This is particularly the case for the Quebec City, Saguenay, and Trois-rivières Census Metropolitan Areas (CMA) as well as certain regions in northern and eastern Quebec.
Nevertheless, homeownership could remain a challenge for certain regions, more specifically those that have been affected by overheating and overbidding, including Greater Montreal and neighbouring cities.
Generally speaking, Quebec households are coping relatively well with the shock of higher interest rates. Many households are advantageously positioned due to excess savings accumulated and increased mortgage prepayments during the COVID-19 pandemic.
Even so, the market could still experience some slowdown and a drop in sales of up to 9 per cent. The median price of a single-family home is forecast to decline just 5 per cent, erasing only the gains of 2022.
Finally, it is unlikely that a large number of new properties will come to market. Consequently, the housing deficit could persist due to a slowdown in housing starts forecast for 2023. Although linked to demographic changes, this situation should nevertheless stabilize the market, which will remain favourable to sellers.
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