For the most part, Canada’s housing markets started 2023 the same way they ended 2022: quietly. Early results for January from local real estate boards generally show persistent weak activity and price declines. Calgary remains among the few exceptions where the number of property sold is still solid—though down nonetheless from sky-high levels a year ago. Homebuyers across Canada are clearly on the defensive. The Bank of Canada’s aggressive rate hike campaign since March 2022 has been a game-changer, sending many to the sidelines (no longer qualifying for a mortgage) and significantly shrinking the budget of others. High-priced markets and areas that experienced tremendous run-ups earlier in the pandemic are seeing the most dramatic downswings. Home resales have plummeted by at least 45% in Vancouver, Toronto and their surrounding regions over the past year. Price drops have also been largest in these markets, exceeding 15% in some cases.
That said, the correction appears to be broadly easing. Monthly rates of decline for home resales and prices have slowed in Ontario (including Toronto), British Columbia (including Vancouver) and elsewhere in recent months. This development along with our expectation that the Bank of Canada has completed its rate hike campaign point toward a cyclical bottom around spring or summer—though the timing may vary from market to market. The recovery that will follow, however, is poised to be very gradual at first. We expect the massive increase in interest rates will continue to hold back activity and compress purchasing budgets for some time.
Toronto area—Inching closer to a cyclical bottom
The market has settled (way) down after a two year-long frenzy. Resale activity is the quietest it’s been in 14 years (excluding the lockdown period), and buyers are progressively rolling back some of the earlier outsized price appreciation. The slide in activity has slowed down materially over the past few months though, suggesting the cyclical bottom may be near. Home resales fell 1% m/m in January, in line with the average rate of decline in the prior three months. The last four months marked a sharp deceleration from the 8% average monthly drop recorded between March and September last year. But we think the price correction has a little longer to run. The MLS HPI has declined for 11 consecutive months—including a 0.2% m/m drop in January—yet it has so far only reversed less than a third of its huge 57% gain in the first two years of the pandemic. Affordability remains excessively stretched for most buyers. In the face of higher interest rates, we expect buyers to continue looking for more affordable options and drive down prices to fit their constrained budget.
Montreal area—Correction isn’t letting up yet
The slowdown was modest at first but has picked up noticeably since late-summer. January resales were the softest since 2009, falling an estimated 11% from December on a seasonally-adjusted basis. Clearly the market correction is showing few signs of letting up at this stage. Median prices are down 10% for condos and 14% for single-family homes since the April peak—slipping a further 1.3% and 2% m/m in January, respectively. We expect the price erosion to continue in the near term. Inventories, while still historically low, are climbing, and demand-supply conditions no longer favour sellers. The sharp deterioration in affordability over the past 12-18 months keeps buyers on edge. A weakening economy may also be on their mind. It will likely take a few more months for confidence to rebuild and market trends to stabilize.
Vancouver area—Buyers wring price concessions
Not much is happening in the Vancouver market these days other than buyers successfully extracting price concessions from sellers. Prices are on a 10-month declining streak as resale activity nears its lowest point since the global financial crisis (excluding the lockdown period). A sharp increase in homes put up for sale didn’t get things going in January. On the contrary, we estimate resales slumped another 7% m/m on a seasonally-adjusted basis, adding up to an eye-popping 55% slide over the past year. The rise in new listings is giving buyers an even stronger hand, which we think will keep driving prices down in the coming months—possibly at an accelerating rate if inventories build up. Since the March 2022 peak, the MLS HPI is down 12% (not seasonally adjusted). Further declines will be needed to ease extremely poor affordability conditions in the area. Single-detached homes (the least affordable option) are most at risk of losing further value in the period ahead. We expect condo prices to be supported by relatively stronger demand.
Calgary—Landing softly
The market is in soft landing mode with activity and prices gently drifting lower while demand-supply conditions remain remarkably tight. In fact, Calgary stands out as the tightest market in Western Canada at this juncture. Though we estimate home resales fell for the 11th-straight month in January (down 8% m/m), they’re still brisk, hovering some 32% above pre-pandemic levels. A sharp drop in new listings may have contributed to the decline last month, making it harder for buyers to find their dream home. Higher interest rates also squeeze buyers’ budget hard, which is sustaining downward pressure on property values despite low inventories. The MLS HPI remains above year-ago levels but probably not for much longer. The index has trended (very) slightly lower since May 2022 and we expect this to continue in the near term.
Read the full report

Read full report
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. The reader is solely liable for any use of the information contained in this document and Royal Bank of Canada (“RBC”) nor any of its affiliates nor any of their respective directors, officers, employees or agents shall be held responsible for any direct or indirect damages arising from the use of this document by the reader. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates. This document may contain forward-looking statements within the meaning of certain securities laws, which are subject to RBC’s caution regarding forward- looking statements. ESG (including climate) metrics, data and other information contained on this website are or may be based on assumptions, estimates and judgements. For cautionary statements relating to the information on this website, refer to the “Caution regarding forward-looking statements” and the “Important notice regarding this document” sections in our latest climate report or sustainability report, available at: https://www.rbc.com/community-social- impact/reporting-performance/index.html. Except as required by law, none of RBC nor any of its affiliates undertake to update any information in this document.