Come May 2020, regional real estate markets began their rebound. The spike in demand continued through 2021, resulting in record-breaking price growth and what many would consider to be the hottest year in Canadian real estate. So, what can we expect in 2022? Here are five trends to keep your eye on.
Early on in the pandemic, some expected a steep decline in home sales and prices in Canada, but nobody could have predicted what actually materialized in the market.
Rumour has it that interest rates will start rising as early as April. This will be the first movement by the Bank of Canada, following a trio of rate cuts in March 2020, prompted by the pandemic and the ensuing economic impacts. The economy started to bounce back with vaccines making their way into arms, businesses reopening and consumer confidence returning. We’re not out of the woods yet, as the Omicron variant prompts further public health measures and threatens lockdowns in some provinces, pumping the brakes on certain industries. Real estate is not one of them. The Canadian housing market resumed its upward trajectory after a steep but short-lived decline in activity at the start of the pandemic, seemingly with no end in sight. High demand resulted in record-breaking price growth, with sales held back only by a lack of supply.
With interest rates expected to start rising in time for the busy spring real estate market, some buyers may be looking to lock in a rock-bottom rate now, since they aren’t likely to get any breaks on prices. Will higher interest rates serve to cool the hot Canadian housing market? The Big 6 banks have predicted the Bank of Canada will raise its overnight rate by one per cent by the end of 2022. Only time will tell what impact this will have on the market, but given current levels of supply and demand, a one-per-cent hike is unlikely to be a significant factor on sales or prices.
Canadian real estate prices will likely continue rising.
Speaking of prices, the 2022 Canadian Housing Market Outlook Report analyzed 38 Canadian housing markets, identifying rising prices in 100% of them in 2021 and further growth expected across the board in 2022. RE/MAX brokers and agents anticipated price growth ranging from a low of +2.5 per cent in Calgary, to a high of +20 per cent in Muskoka. From a national perspective, the average residential price expected to increase by 9.2 per cent.Low supply will remain a concern across the Canadian housing market.
Housing affordability has been on a steady decline in Canada, and was a key focus for all political parties in the 2021 federal election. Ontario has become ground zero for unaffordability, so it’s expected that this will also be a hot topic in the provincial election slated for June 2, 2022. What’s the culprit behind rising prices? Low supply.
Industry experts have attributed the rapidly rising price of homes to the housing supply shortage, which was amplified by a notable spike in demand in 2020 and 2021. This is expected to continue, with 1.2 million people expected to immigrate to Canada by 2023 and all of them presumingly in need of a home. With no major increase in listings or new construction expected, industry experts suggest market pressures could mount, putting ever greater pressure on prices.
While opinions vary on how to effectively add supply to the market, RE/MAX executives have pointed to a few possible solutions, including:
- A National Housing Strategy to boost supply, in a coordinated effort between the federal, provincial and municipal governments.
- Incentivizing developers to build more affordable, family-sized homes close to transit hubs, such as tax rebates, cutting the prohibitive red tape and easing the building application and approval process.
- Incentivizing homeowners to move and easing the financial burden associated with selling a home by offering tax rebates and re-evaluating Toronto’s double Land Transfer Tax (currently, homebuyers here pay a provincial and municipal LTT). This could help increase the supply of listings.
The federal and provincial governments are also encouraged to collaborate on ways to improve local economies to help attract residents. Canada has lots of “affordable” cities which don’t always have the same appeal as large urban centres do. Shifting the focus from cities like Toronto and Vancouver could help ease the pressure and prohibitive price growth.Canadian real estate will be dominated by seller’s markets.
By the end of 2021, 97 per cent of Canadian housing markets analyzed by RE/MAX Canada (37 out of 38) were expected to be seller’s markets in 2022, characterized by low supply, high demand and rising prices. This is likely to continue in 2022, given that adding supply to the market isn’t a quick fix.Virtual transactions are the way of the future.
Virtual home-buying and -selling wasn’t just a temporary trend that carried us through the pandemic lockdowns. Quite simply, consumers have had a taste of this sweet convenience and they’re unlikely to give it up when COVID-19 is behind us. From websites like REMAX.ca and Realtor.ca bringing listings right to your fingertips, and virtual tours offering opportunities to view a home without ever leaving the comfort of your own, to the ease of digital paperwork, it’s safe to say the virtual trend will be the new reality for many buyers and sellers.
© Public Relations & Content Manager | RE/MAX Canada Lydia McNutt