Even after smashing all the records in 2021—for high sales and prices and low inventories—Canada’s housing market isn’t about to buckle. Economic experts forecast that the cost of houses in Canada will continue to skyrocket in 2022.
Homebuyers in Canada expect the Bank of Canada’s rate liftoff to turn down the market’s heat in 2022 as the inability to afford homes sends buyers to the sidelines.
However, housing experts say prospective homebuyers that expect Wednesday’s interest rate hike to cool the country’s hot real estate market will likely be disappointed.
Even worse, a housing market crash may occur, potentially causing a recession. Plenty of unmet housing demand remains in the market and will keep fueling tremendous activity across the country.
These housing experts believe that the pent-up demand for homes in Canada is so high and supply still so limited that the Bank of Canada’s decision to hike the rate to 0.5 % won’t take much of an edge off the real estate market.
Looking into 2022 and beyond, many homebuyers wonder if any relief is coming to Canada’s urban housing markets.
Will prices dip or only hike further out of reach for the average homebuyer? The national average home price broke a record in January 2022 as Canadian prices continued to rise across the country.
Over the first ten months of 2021 alone, more than 580,000 homes were bought and sold, outperforming the amount from the entire previous year, when a record 552,423 homes changed hands.
Overall, the national MLS Home Price Index finished the year by 25.3 % from 2020.
Market watchers agree that the housing market, fuelled by historically low-interest rates and a lessening housing supply, reflects no signs of significantly slowing down.
Moody’s forecasting and predictions, a leading credit rating agency, don’t paint a positive picture for those looking for cheap and affordable or accessible housing costs.
Prices may start hiking again in late 2023 as heightened immigration and a fully recovered labour market drive wage and salary growth.
The low-interest rates, economic support, and lockdowns that drastically moved the consumer appetite contributed to a sharp hike in demand and, consequently, price growth across almost every market in Canada.
According to Moody’s Analytics, the firm’s forecasting model shows that real estate markets are overvalued by up to 91 % across Canada, with a 22.59-per-cent average in urban markets.
The good news is that despite this label, Moody’s is not expecting the bubble to burst, causing a housing crash. Though real estate prices are a bit overvalued, there is no expectation those prices will fall. Expectations are that higher mortgage rates will normalize the growth.
As mortgage rates rise, their model shows low to no price growth. Moody predicts that urban housing prices will rise 2.63 % from Q4 2021 to Q3 2022.
The prices for residential properties in cities like Montréal, Ottawa, Toronto, Calgary, Vancouver, and Victoria continue to hike as prices increase across Canada by 7% since the third quarter of 2020.
The costs for condo apartments in Montréal, Ottawa, Toronto, Calgary, Vancouver, and Victoria increased by 10.4% compared to the third quarter of 2019. The most significant increase seen was in Ottawa, where home prices have risen by 14.9% compared to the third quarter of 2019.
Montreal and Toronto are still hot with 10.2% and 9% increases, respectively. On the other hand, Calgary has faced a decline in home values, at least this partially contributed to falling oil prices and decreased local investment.