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What Would a Recession Mean for Canadian Real Estate in 2023?

Alice Prince
Mar 20 8 minutes read

Many fear a recession in 2023—but is one inevitable? Let’s break it down.

What is a recession?

The most widely-accepted Canadian meaning of “recession” comes from the C.D. Howe Institute Business Cycle Council. The Council defines a recession as “a pronounced, persistent, and pervasive decline in aggregate economic activity.” Generally, the decline has to substantially affect multiple economic sectors for an extended period of time to be considered a recession. In Canada, the final call comes down to the federal government. A recession—if and when it happens—is announced by the Bank of Canada or the minister of finance. 

This definition is helpful if you always have your eye on the economy, but the average person recognizes a recession more by its effects. In a significant recession, the public generally experiences job loss or lower job security, in addition to less bargaining power in the workplace. Those searching for a first job or switching careers during a recession will find their options reduced and their starting salaries lower than they would be otherwise. This can impact your wealth accumulation for years to come as you catch up to the salary you could’ve had in a stronger economy. Additionally, your retirement and other investment accounts can take a hit during a recession due to rocky markets.

It’s also likely that you’ll have a more difficult time borrowing money. Like everyone else, financial institutions tighten up during an economic decline. This includes stricter rules, lower credit limits, and fewer types of credit available. 

Are we in a recession?

As of now, no. Despite widespread fears, the Canadian economy is not currently in a recession. After pausing its rate hikes in January 2023, the Bank of Canada is aiming to avoid a full-blown recession and head into what’s known as a “soft landing.”

Soft landings are part of the economic cycle. If you imagine the economy as a series of peaks and valleys, a soft landing is a valley—but it’s shallow when compared to a major economic downturn. Central banks try for a soft landing when they take action on inflation by increasing interest rates, like the moves we’ve seen from the BoC. The idea of a soft landing is to slow an overheated, rapidly inflating economy without a severe and painful recession.

Where is the economy headed in 2023? Here are opinions from top economic experts:


According to BDC, “a recession is still avoidable for the Canadian economy. However, 2023 will be shaped by growth below the economy’s potential and a great deal of uncertainty.” The bank suggests that the Canadian economy will slow down, but not fall into a full-blown recession. BDC notes that although average household savings are still higher than they were before the pandemic, household spending will decline. With talks of a recession, many Canadian consumers will become more cautious. 

Pierre Cléroux, Vice President of BDC, says, “Our most plausible scenario is the Canadian GDP growing by 0.5% in 2023, with one or two negative quarters here and there.” 


Looking at current global conditions, including the state of European and U.S. economies, economists from Deloitte predict a recession in 2023. The financial firm notes that if the U.S. enters a recession, Canada will be hard hit due to our dependence on trade with the states. The firm also expects higher interest payments on household debts to put Canadians in a pinch and lower consumer spending. However, it concludes that “we still expect the recession to be relatively mild and short-lived by historical standards.”

World Economic Forum

In January, the World Economic Forum released results in which two-thirds of surveyed economists predicted a recession in 2023. Their Chief Economist's Outlook, January 2023, stated, “Global growth prospects remain anaemic and global recession risk is high.”

Bank of Canada

Speaking to CTV, Tiff Macklem, Governor of the Bank of Canada, says he isn’t ruling out a “mild recession.” While the Bank is not predicting a recession, Mackelem notes that it is possible. The Bank has paused its interest rate hikes, but it may take some time to see the full effects of higher interest rates on the Canadian economy. If inflation doesn’t go down as predicted, the Bank may raise interest rates again.

So, is a recession coming?

It’s possible, but not inevitable. Some economists are predicting one by the end of 2023, and there are many variable factors that affect the economy outside of our control. Big ones right now include COVID-19 and supply chain disruptions, climate change, the war in Ukraine, and more. Even the experts have uncertainties, and as Deloitte writes in its quarterly report, “the economic outlook remains clouded in uncertainty.” Most experts are forecasting some kind of economic slowdown—but if it’s a recession, it’s likely to be a “recession with a small r.”

What’s that? It’s a short-term, mild period of economic contraction. It can be uncomfortable, but it doesn’t have the far-reaching or devastating effects of a major Recession like the one in the early 1980s or the late 2000s.

Most experts believe that the strength of the labour market will be a major factor in preventing a severe economic downturn. There have been high-profile layoffs in the tech industry, and consumer spending has started to slightly slow—but the unemployment rate is very low, job growth has been strong, and there are still more available jobs than there are available workers. Why is this important? Because usually, “Rising unemployment is one of a number of indicators that define a recession. It also makes the downturn worse” (McGrath, 2022). That’s why economists will be closely monitoring the job market throughout 2023. As of February 2023, the Canadian job market is still beating expectations. The unemployment rate remained at 5%, and average hourly wages rose on a year-over-year basis. 

What would a recession mean for real estate in 2023?

A recession is never good news—but for the current real estate market, it’s not all bad. 

First, interest rates will come down if the economy heads into a recession. The BoC has hiked up rates to slow consumer spending and reduce inflation, but if the result of that is a recession, rates will go down again. For buyers, that means mortgages will become more affordable—and since current forecasts don’t predict a huge downturn in the job market, you’re less likely to experience job loss that will affect your ability to buy. 

If you’re selling, affordable mortgages are good for you too. Buyers who have been sitting out of the market waiting for rates to drop will jump in, which means it could be easier for your real estate agent to find the right fit.

Second, buyers are likely to find lower home prices. Competition tends to be lower during a recession, which allows prices to drop. Additionally, a higher number of sellers are likely to reduce their prices to sell quickly or to get out of a mortgage. 

However, if you’re selling during a recession and your personal economic situation is good, you can take your time. How should you plan your sale when the economy is changing? Tell us what you’re trying to achieve, and we’ll help you get there.

Let’s go.

Recession forecasts making you nervous? Get in touch. Our team is experienced in navigating market ups and downs, and we’re prepared to help you reach your real estate goals—no matter what the economy is doing. Click the button below to get started.

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