A drop in housing prices amid a sudden increase in supply

One of Canada's major banks has predicted that we will face a sharp decline in housing prices amid a sudden increase in supply in some real estate markets.

TD Bank released its forecast on Wednesday, predicting a 10 percent drop in home prices from the third quarter to early next year. It is also predicted that in September, this decrease will reach five percent.

Economists attributed the change to two things, one is a rise in bond yields and the other is a "more than expected" decline in sales in the British Columbia and Ontario housing markets.

The ratio of Ontario real estate sales to homes for sale fell from 63 percent in May to 39 percent in October. The sudden increase in supply has largely exacerbated this ratio.

TD Bank's update comes after the Canadian Real Estate Association (CREA) said last week that Canada's major housing markets saw a "significant decline" in property sales in October. The association announced that home sales in October decreased by 5.6 percent compared to the previous month.

Bank of Canada Governor Tiff Macklem said on Wednesday that the "excessive demand" fueling inflation has dissipated. Statistics Canada also reported on Tuesday that the annual rate of inflation slowed sharply to 3.1 percent in October, down from 3.8 percent the previous month and 8.1 percent in June 2022.

The central bank has kept the interest rate constant at five percent in its last two decisions and will announce its final decision on the interest rate on December 6.

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