The housing market continues to be a favourite topic of conversation at water coolers around the country. There is constant chatter about the soaring property market, the purported “bubble” that many expect to pop and the ever-climbing prices that have yet to hit a ceiling. Thanks to low interest rates, Canadian homeowners have been able to afford their monthly mortgage payments despite aggressive property appreciation and heated bidding wars.
Will all of that change this year? In an effort to quell historically high levels of inflation and to cool the overheated market, the Bank of Canada has announced that it will raise rates several times which will result in many Canadians digging deeper into their pockets to afford their homes. Those with little financial wiggle-room will have to re-adjust their expectations or accept the fact that they may not be able to get on the property ladder.
Will a rise in rates cool the market or will the lack of supply continue to drive up sale prices? According to CREA’s Senior Economist, Shaun Cathcart: “There are currently fewer properties listed for sale in Canada than at any point on record.” As such, Cathcart does not expect housing affordability to improve in the near future. As long as supply is at a record low, Canadians will likely continue to participate in a strong seller’s market.
According to RE/MAX Canada, these are four housing market trends to watch for in 2022:
1. Interest Rates Expected to Rise
The first rate hike is expected by April. The Bank of Canada has kept rates at historic lows in response to the economic impact of the pandemic; however, with more vaccines making it into arms, there is light at the end of the tunnel. There has been a slight rebound in consumer confidence and the federal government is getting ready to raise the rates. The Big Banks are predicting an overnight rate hike of 1% by the end of the year, but with supply at a record low, an increase of 1% is not expected to slow the market or significantly affect prices.
2. Home Prices Likely to Keep Climbing
RE/MAX Canada is forecasting the national average residential price to increase by 9.2%. In some markets, those increases could rise as much as 20%.
3. Low Supply
Rising prices are being attributed to low inventory. With so little to choose from, Canadians are engaging in aggressive bidding wars hoping that they will be the winners in battles that sometimes involve 50 or more prospective buyers. The number of listings are not expected to increase significantly this year which may increase the pressure on the markets and drive prices up further.
4. Seller’s Markets will Dominate Across the Nation
“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 inventory, high demand and soaring sale prices, seller’s markets will continue to fuel the wild ride of multiple bids and sky high prices.
The housing market is sure to keep water cooler conversation interesting this year. If you have questions about the market or are thinking about buying or selling in 2022, reach out to Emily DeSantis at Portfolio Realty Group.
