Will House Prices Drop In Ontario 2023?

by Helana Mulder on 10 Feb 2023

If you paid any attention to the Canadian housing market in the last couple of years, you know that there was a major housing boom in the summer of 2021. This boom was caused by a huge demand from buyers which drove the asking and selling prices of homes up dramatically.

In April 2020, at the start of the pandemic, the average residential sale price in Ontario was sitting at just under $600,000. In September 2021, that number increased to over $880,000.

Now, as the housing boom has slowed and we've started to see some balancing and dropping in prices, you may be wondering what 2023 will bring.

Here is a look back at the 2022 real estate market and a look ahead into 2023.

Canadian Real Estate Association (CREA) 2022 National Statistics

The CREA had a recent report released that looks at the national average housing price and other key indicators of the temperature of the market for that year or quarter.

Some Key Highlights:

The report outlines various pieces of data in Canada's housing market, but here are the points that were highlighted:

  • National home sales declined by 3.3% month over month in November 2022.
  • The actual (not seasonally adjusted) monthly activity was 38.9% below November 2021.
  • The MLS Home Price Index (HPI) had a 1.4 per cent drop month over month and decreased 4.4% year over year.
  • The actual (not seasonally adjusted) national average sale price posted a 12% year-over-year decline in November.

Overall, the last quarter of 2022 really saw a decrease in real estate transactions and home sales.

The report states that "the actual (not seasonally adjusted) number of transactions in November 2022 came in 38.9% below a near-record for that month last year and stood about 13% below the pre-COVID-19 10-year average for November sales."

The Rising Interest Rates

The declining home sales can be attributed to a variety of factors, particularly the high-interest rates and the effects of inflation on the country. Throughout 2022, the Bank of Canada has increased the interest rates a few times. As of December 2022, the interest rate sits at 4.25% which is a much higher rate than March's 0.25%.

These higher interest rates are adjusted according to inflation. Because inflation has been increasing in the Canadian economy, Canada's central bank has adjusted its interest rates accordingly.

What Was The 2022 National Average Home Price In The Housing Market?

The CREA also reports on national average home prices.

The report states, "The actual (not seasonally adjusted) national average home price was $632,802 in November 2022, down 12% from the same month last year. The national average price is heavily influenced by sales in Greater Vancouver and the GTA [Greater Toronto Area], two of Canada's most active and expensive housing markets. Excluding these two markets from the calculation cuts more than $123,000 from the national average."

The CREA also has a price map that showcases the average property prices by province and territory Here are those prices:

  • British Columbia: $904,020
  • Alberta: $422,709
  • Saskatchewan: $321,000
  • Manitoba: $330,742
  • Ontario: $829,934
  • Quebec: $479,787
  • New Brunswick: $269,800
  • Newfoundland/Labrador: $280,200
  • Nova Scotia: $368,600
  • Prince Edward Island: $355,000
  • Yukon: $498,567
  • Northwest Territories: $392,255

As we can see, while the average housing prices in Ontario are still much higher than in years past, the average has gone down from the 2021 price.

Predictions and Forecast For 2023

At the end of 2022, we've seen the housing market begin to slow. This is evident in the declining home sales, a slight decline in home prices, and a lack of demand for houses. As we enter 2023, there are a few predictions and forecasts that we should expect in the coming months.

It is unlikely that there will be a sharp decline in home prices even though they have decreased slightly. While the housing market is cooling down and balancing, it's not expected to increase affordability, particularly in Ontario.

With high interest and mortgage rates, the demand in the market has decreased even though the housing supply has stayed the same or increased. There are fewer buyers hoping to make a sale in the Canadian housing market as many homeowners are choosing to save instead of buy.

As well, the high rates also mean that rent prices are expected to rise, especially in major cities like Toronto, Montreal, and Halifax.

That being said, two banks (Desjardins and TD economics) both agree that home prices are expected to drop 25% by the end of 2023, particularly in provinces other than Ontario. For a smaller city, a 15% decrease in prices is expected, especially in the London, Kitchener Waterloo, Barrie, and Georgian Bay Area.

What Is The Expected Average Home Price For 2023?

The housing market is set to see some decline in prices across Ontario. By the fourth quarter of 2023, the average prices of houses in Canada are set to fall about 1 per cent to just over $750,000.

Affordability in the Housing Market 

While the housing market is not predicted to crash or have any major effects, home prices are predicted to fall slightly. However, we will not see a steep drop or any major moves toward housing affordability.

For a long time now, real estate prices in Canada have been disconnected from salaries and incomes. Even if the inventory of listings sees a decline in prices, it does not necessarily mean that the average person can afford one.

As we've stated above, rising interest rates mean that mortgage payments are front of mind for many property owners. Many owners have opted to offset their payments with rental income by leasing out investment single detached homes or even the basement of their primary residence. In order to manage their mortgage payments, the rent prices are set quite high and aren't expected to fall. This means that, for many, housing is becoming more and more unaffordable in the Canadian housing market.

Another factor in the 2023 real estate forecast is the influence of immigrants on the housing market. Lately, Canada has seen a huge increase in immigration and this has been feeling larger demand for new housing. However, starting in January 2023, non-Canadians are banned from purchasing homes in Canada (with some exceptions) for two years as a way to improve affordability for Canadian citizens.


The housing markets in Canada have seen an increase in the real estate housing supply and a drop in prices in the last few months. As well, many homeowners are opting to save rather than sell. In 2023, the prices in many cities across Canada are predicted to drop, but not enough to make them more affordable for many people.

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