P.E.I. housing prices to drop by the end of 2023, predicts Desjardins
'It looks like the peak home sales and price levels are behind us'
Canadian housing prices are expected to drop by the end of next year — with some of the largest decreases forecast on P.E.I., according to Canadian financial services company Desjardins.
In its Canadian Residential Real Estate Outlook, Desjardins predicts home prices on the Island could fall as much as 25 per cent by December 2023 compared to 2019 prices.
Marc Desormeaux is the principal economist for Canadian economics at Desjardins and worked on the report, which was released in June and updated on August 11th.
"Generally speaking, we think the Atlantic provinces probably have the furthest to fall in terms of home prices over the next couple of years," said Desormeaux.
"Sales are also expected to decline in a broad-based way across all the provinces."
During the pandemic, Desormeaux said, thousands of people moved to P.E.I. largely because of remote work — and that influx drove up both demand and prices. In particular, he said demand outside major city centres was up.
"We expect that effect to increasingly ease over the next few years, and that should contribute to far less froth on the housing market," he said.
"It looks like the peak home sales and price levels are behind us."
But Desormeaux warns even a steep drop won't necessarily mean homes are more affordable, thanks to rising interest rates.
"You've got prices going down, on other hand the cost of borrowing is more expensive now," he said.
He doesn't expect Canadian house prices will return to pre-pandemic numbers, but anticipates prices will be lower than they were in February 2022.
A return to 'a balanced market'
According to the monthly statistical report from MLS, home sales for the month of July 2022 were 22 per cent below the five-year average and 18 per cent below the 10-year average.
Average home prices, however, were slightly up the same month last year, with an average selling price of $396,987.
P.E.I. Real Estate Association president James Marjerrison said it's expected that rising mortgage rates would impact demand.
"We've definitely seen a number of sales drop over the last couple of months, which would indicate more of a balanced market," said Marjerrison.
Marjerrison said P.E.I. has seen steep increases in the last few years, so it's not surprising to see prices begin to cool — but it's hard to say how far prices will fall or how long that fall will last.
'Starting to stabilize'
Joel Ives, who Century 21 Colonial Realty and has been in the industry since 1991, says he's seen P.E.I.'s market change dramatically over the years.
Most recently, he said, some houses have sold for twice what they would have sold for seven years ago.
"All our prices are just kind of starting to stabilize," said Ives.
He says there's still plenty of demand and describes P.E.I.'s market as healthy, saying some properties are still attracting multiple bids.
He questions the prediction of a 25-per-cent price drop on the Island, saying location will be a huge factor.
"I take those studies with a grain of salt," he said.
"I've never really seen prices drop on P.E.I. where people have lost money on their house."