Buying a House in 2023: 5 Things to Know

Black couple moving sofa in living room, replacing furniture at home

The increasing rate of mortgages caused Canada’s housing market to come to a standstill in the second portion of 2022. It marked the end of Canada’s long-running real estate boom.

It’s a difficult moment for those in search of an apartment. The slowdown of 2022 is the most significant market change many Canadians will remember, yet the prices are still high. It’s important to think about whether purchasing a home is going to be easier in 2023.

Probably not. The same problems that existed in 2022 will persist into 2023. However, there is a new savings tool Canadians can use that may improve their chances of cracking the market.


Determine your budget

Before you start looking at houses, it’s important to determine how much you can afford to spend. This will help you narrow down your search to houses that are within your price range and prevent you from falling in love with a house that you can’t afford.

Housing prices are unlikely to crash

A major and annoying thing about trying to buy a home in Canada at present is that the sales are far down, yet prices aren’t decreasing. And they aren’t expected to decline much in 2023. Over 532,000 houses are set to be sold in 2022, according to the Canadian Real Estate Association. CREA estimates that the median price for a house in Canada growing by 4.7 percent by 2022, bringing it to $720,255.

In 2023 CREA forecasts that national home sales will decline by just 2.3 percent to approximately 520,000 units. The average cost for homes across the country is predicted to remain the same, growing only 0.2 percent. At a provincial level, CREA projects only three provinces that could see an increase in their average sales price, British Columbia, Ontario and Manitoba. This dip could be very small: The median price for both B.C. and Ontario is anticipated to fall by just 1.2 percent and stay well above $900,000.

The lingering inflation could mean the interest rates could rise more

The Bank of Canada is expected to raise the overnight rate once more in December 2022. However, should inflation remains high, it could mean they are required to increase the rate until 2023. This could mean more expensive variable mortgage rates.

If inflation starts to recede in 2023, with fingers crossed — do not expect to see the Bank of Canada reverse the course too quickly and decrease the overnight rate at the same rate they increased by 2022. They don’t want an unintended backslide that could trigger a second cycle of rising prices. If inflation, the overnight rate and variable mortgage rates remain at a high level, expect the fixed rate of mortgage to follow. In these times of uncertainty for the economy and uncertainty, it is evident that the Canadian bond market appears promising for investors. As the yields of bonds rise and so do the fixed mortgage rates for five years.

The supply of housing will continue to be a challenge

From 2016 until 2021, the Canadian population increased nearly twice that of any other G7 country. But the supply of housing hasn’t increased at nearly the same rate. This is one of the main reasons why the housing market in Canada will be under constant stress through 2023 and possibly beyond.

In the first half of the year 2022, the number of housing starts dropped by five percent in the country’s six biggest metropolitan areas, as per the Canadian Mortgage and Housing Corporation [22. If the trend continues for the remainder of this year CMHC estimates the number of 254,000 housing starts in 2022. This is a reduction of 9,000 units when compared to last year’s. Housing starts are predicted to drop another 10,000 units by 2023.

And the type of homes being constructed might not be in line with people’s needs. The construction is centered around condos as well as purpose-built rental units within Vancouver, Montreal and Toronto properties that account for an increasing proportion of new homes being constructed around Calgary, Edmonton and Ottawa. With the need for housing increasing across the country, this is not likely to change as a surge in the construction of high-density homes won’t make buying a detached home more straightforward.

Other elements that could impact the supply of housing in 2023 include a shortage of workers in the construction industry as well as the rising costs of materials and labour. In addition, high-interest rates raise the cost and the risk for developers working on multi-million-dollar projects.

The ban on foreign buyers will not slow the demand for housing

From January 1st, 2023, the two-year ban on purchases of residential real estate by non-Canadians or non-permanent residents will come into the market.

“We are going to stop foreign investors from investing their cash in Canada by purchasing houses,” Finance Minister Chrystia Freeland told the Canadian Press on April.

The rationale behind the ban is sound that lower demand is better for buyers who are fighting for a limited housing inventory. However, studies have shown that foreign buyers comprise just a tiny percentage of home purchases in the majority of Canadian markets. Furthermore, the nation’s goal for immigration in 2023 — 447.055will likely place greater pressure on the housing stock than the ban eases.

The newcomers will not all be able to purchase a house when they arrive. They’ll need to establish credit and make sure they have enough down payment funds and also have a residence status that permits them to stay out of the restriction. They’ll eventually become part of the home-buyer population, which could inspire developers to build more homes.

The First Home Savings Plan could help buyers eventually.

There is finally some positive news. The mid-2023 timeframe will mark the debut of the First Home Savings Account, an investment and savings instrument designed to assist Canadians in overcoming the daunting task of buying a house.

The FHSA will permit buyers to put aside an amount of up to $40,000 to finance purchasing their first house. Contributions are tax-deductible and can be as high as $8,000 per year.

A savings of $40,000 in a minimum period of five years might not be a great idea; however, consider the FHSA to be a substitute savings account that is tax-free, and it begins to look more appealing. You can have the same type of investment in an FHSA as you would put into the TFSA, which means that the money you save could be put into a variety of different types of assets — bonds, stocks, GICs, mutual funds — which will make your money grow tax-free.

It’s possible that the First Home Savings Account may not be able to help you purchase an apartment in 2023, but if you’re considering an acquisition in the next few years, you should consider it the possibility now.

The Bottom line: Don’t give up!

A high rate of interest and rising house prices will make buying homes extremely difficult in 2023. But surviving in the Canadian market for housing still requires the same mix of dedication, perseverance and luck as it has always required.

It’s impossible to control the rise in housing prices or inflation; however, you can make an effort to get rid of those debts, make sure you save the most money possible and even benefit from the current shortage of workers to secure a more lucrative job. If your dream home is beyond your reach, however, at the very least, your finances will be in a position that allows you to consider a variety of alternatives. If you are looking forward to buy your home in 2023 Mortgage Broker Langley will help you out. Our highly trained brokers have the tools and experience to help you make the right choice for you budget.

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