A new housing forecast report projects home prices decreasing for most units in the Greater Toronto Area (GTA) by the end of 2023.

Royal LePage released its 2023 Market Survey Forecast on Tuesday, and the real estate company notes that as the Bank of Canada has started to “aggressively” raise interest rates, prices across several Canadian markets have been declining.

While prices have been dropping at a “modest” rate of decline, aggregate home prices in the GTA are set to be two per cent cheaper year-over-year, landing at $1,056,734 by the end of 2023.

The median price for detached homes is also expected to drop by 2.5 per cent to $1,329,413, while condo prices are set to increase by one per cent to just over $700,000.

“The city of Toronto and the surrounding regions have seen some of the steepest price declines in the country since interest rates began climbing earlier this year. Still, home prices remain out of reach for many would-be buyers, putting a lot of extra pressure on the rental market, which has seen prices spike in recent months,” chief operating officer of Royal LePage Real Estate Services, Karen Yolevski, said.

2023 royal lepage market survey forecast

Meanwhile, rent in Toronto has spiked by nearly 27 per cent compared to October 2021, according to a recent report from Urbanation and Rentals.ca, with the average price across all units hovering around $2,820 per month.

But “normal trends” for the real estate market are expected to return soon, Yolevski noted.

More people are expected to buy into the market next year, should interest rates stabilize by then; the biggest challenge for prospective homebuyers is the lack of supply.

“I expect buyers who have been waiting for prices to level off will encounter increased competition when they re-enter the buying cycle, specifically in the more affordable condo segment, although not at the levels seen in 2021 and early 2022,” Yolevski said.

“A significant boost in inventory will be needed in the coming years to satisfy sidelined demand and an increasing number of newcomers.”