As rising interest rates weigh on housing affordability, a new report suggests some relief may be on the horizon. The Desjardins report on Canadian residential real estate outlook on Thursday said housing affordability is set to improve in 2023. The report also added that provinces that saw the biggest gains in home prices during the pandemic will see the sharpest post-pandemic corrections, including the Atlantic provinces and areas around Toronto, Vancouver, and Montreal. However, these areas are not necessarily those that will see the biggest improvement in affordability, said Randall Bartlett, Chief Canadian Economist at Desjardins, who added: "In cities that saw the greatest erosion in affordability ... we think it’s unlikely they will return to pre-pandemic levels within the next two years."

Also, Edmonton, Calgary, and Winnipeg will see the biggest improvements in affordability. While cities like Edmonton and Calgary will return to pre-pandemic affordability levels by late 2024, Ontario will not come close to doing so. With rising interest rates, Bartlett said housing affordability will continue to deteriorate for another three to six months and that once interest rates stabilize, affordability will improve.