The average home price in the Greater Toronto Area is expected to fall by over $140,000 in the coming year.

According to RE/MAX Canada's Toronto Housing Market Outlook 2023, the average price of a home in the region will drop to $1,061,853.91 next year, an 11.8 per cent decline from the $1,203,916.00 average experienced between January 1, 2022 and October 31, 2022.

The decline follows an 11 per cent increase from 2021 to 2022.

Average sales in the GTA are expected to decline by 11.4 per cent next year, with balanced conditions persisting throughout 2023.

Toronto home prices are expected to dip below 2021 levels next year. Image via RE/MAX Canada.

"We expect that market activity will return to a more-regular pace, as economic conditions stabilize toward the second half of 2023," said Elton Ash, Executive Vice President of RE/MAX Canada.

The report lays out several key trends that will impact the GTA housing market in 2023, including rising interest rates and associated price adjustments, higher unemployment due to an economic slowdown, and improved affordability.

These will result in less competition for buyers and sellers alike. The former will enjoy lower prices and more choice in the market, while the latter will experience a trade-up advantage and a greater ability to relocate to the suburbs.

Rising interest rates, in particular, will be a "dominant theme" in 2023, with a slower market expected for buyers and sellers alike. First-time buyers will be heavily impacted, and many may choose to pause their search due to a lack of affordability.

The luxury market will also feel a distinct strain, and will continue to cool in 2023 under the weight of market pressures.

Rising rates may also delay new construction projects in the GTA as the gap between market prices and construction costs widens.

Across the country, RE/MAX Canada anticipates that average residential sale prices will fall by 3.3 per cent in 2023. 

According to the report, more than 60 per cent of Canadians don't plan to buy or sell a home in early 2023 due to current market conditions. Fifteen per cent are considering moving to another province in order to find more affordable housing.

"Canadians are understandably hesitant to engage in the market early in 2023. Despite this, more Canadians see real estate as a solid long-term investment when compared to this time last year," said Christopher Alexander, President of RE/MAX Canada.

"Governments must collaborate to address supply challenges, to make home ownership feasible for those who want it."