P.E.I. housing prices to drop by the end of 2023, predicts Desjardins

Canadian housing prices are expected todrop by the end of next yearwith some of the largest decreases forecast onP.E.I.,according toCanadian financial services company Desjardins.

Inits Canadian Residential Real Estate Outlook,Desjardins predictshome prices on the Island could fall as much as 25 per cent by December 2023 compared to 2019 prices.

Marc Desormeauxis the principal economist for Canadian economics atDesjardinsand worked on the report, which was released in June andupdated onAugust 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 ofpeople moved to P.E.I. largely because of remote work and that influxdrove up both demand and prices. In particular, he saiddemand 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."

ButDesormeauxwarnseven a steep dropwon't necessarily mean homes aremore 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 expectCanadian houseprices will return to pre-pandemic numbers, but anticipates prices will be lower than they were inFebruary 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 centbelow the five-year average and 18 per centbelow the 10-year average.

Average home prices, however, were slightly up the same monthlast year,with anaverage selling price of$396,987.

P.E.I. Real Estate Association president James Marjerrisonsaid it's expected thatrising mortgage rates would impactdemand.

"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 seensteep 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, whoCentury 21 Colonial Realty andhas been in the industrysince 1991, sayshe's seenP.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 saysthere's still plentyof demandand describes P.E.I.'s market as healthy, saying some properties are still attracting multiple bids.

He questions the prediction of a 25-per-centprice 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. wherepeople have lost money on their house."