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'A buyers' market with no buyers': CIBC economist on housing market
12/13/2023 | Posted in Canadian Housing Market by Paul DeAdder | Back to Main Blog Page
Some home sellers are struggling to find buyers amid high mortgage costs, according to an economist who says Canada’s housing market is in the midst of “a very healthy correction.”
“We have more supply and less demand. This is becoming a buyers’ market – a buyers’ market with no buyers,” Benjamin Tal, deputy chief economist at CIBC World Markets, told BNN Bloomberg in a television interview.
Canada’s housing market is facing its “biggest test” since the 1991 recession as home sales drop but listings go up, Tal said.
“It's a very weak market,” he said Tuesday.
A dearth of listings had previously been propping prices up, Tal said, but listings have increased as high interest rates and other costs put pressure on homeowners.
He added that the housing market is in a “very healthy process.”
“Prices went up by 45 per cent over the course of breakfast during COVID-19, so what you're seeing now is a very healthy correction,” he said.
2024 OUTLOOK
James Laird, co-CEO of Ratehub.ca and president of CanWise mortgage lender, said he expects home prices will rise “modestly” in 2024 due to strong immigration numbers and an expected decline in interest rates.
In an emailed statement, Laird said the federal government’s 2024 target of 485,000 newcomers will continue to drive up housing demand.
SLOWING CONDO MARKET
Tal noted that Canada’s condo market is at the forefront of the current slowdown, with investors pulling out of the space rapidly -- while supply is still being built based on previous levels of demand.
“You have supply coming, but that's supply that started two years ago, not now, and the demand is going down,” he said.
“That's a sure-fire recipe for some slowing in the condo space, and that’s exactly what we’re seeing.”
However, Tal cautioned that the slowdown in the near-term could discourage new builds and exacerbate Canada’s housing supply shortage, which will eventually drive prices up again.
“Two years from now when interest rates are (lower) and demand is there … the supply of new units will not be there,” he said.
Source: BNN Bloomberg
