Housing outlook
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So, what comes next for Canadian real estate?

Lenders, economists and brokerage firms have been releasing predictions for the coming year. Some are optimistic with respect to what lies ahead, while others remain concerned about rising housing prices and market shortages.

With myriad issues affecting the market — COVID-19 being the largest disruptor — combined with rising costs and interest rates expected to increase next year, many potential investors and homebuyers are counting on research-based opinions to steer them in the right direction as they prepare for the big decision on whether to make that ultimate purchase.

In the past few weeks, four major voices in the real estate market have released their 2022 forecasts: CBRE, RE/MAX Canada, RBC Economics and Royal LePage. Here’s a breakdown of how each outlet is predicting what will happen next year.

 

RE/MAX Canada

In its 2022 Canadian Housing Market Outlook Report, RE/MAX Canada outlined some of the trends and changes we could expect for real estate come the new year.

In light of housing supply shortages, which will ultimately put pressure on prices, RE/MAX Canada predicts that there will be a 9.2 per cent increase in average residential sales prices across the country in 2022. Migration between provinces is expected to also be a key driver of buying and selling activity in many communities.

In Ontario, market activity is expected to “remain steady,” next year, but with varying levels of price growth across the regions. Larger markets in the province could see returning immigration place pressure on supply levels and prices. Ottawa, Toronto, Mississauga and Durham Region could see average prices climb five per cent, 10 per cent, 14 per cent and seven per cent respectively in 2022. In smaller communities such as Muskoka and Thunder Bay, the move-over trend is anticipated to help drive average sale prices up by 20 per cent and 10 per cent, respectively.

Out west, Calgary and Edmonton saw their markets flip from balanced in 2020 to a seller’s market in 2021, which is expected to continue in 2022. This trend was caused by homebuyer demand from inter-provincial migration from Ontario and British Columbia. Buyers looking for larger properties flocked to communities in Victoria, Nanaimo, Regina and Kelowna, a pattern that will sustain demand and price growth in 2022, RE/MAX Canada predicts.

From a price perspective, the Greater Vancouver Area, Calgary, Edmonton and Victoria could see average prices jump 5.5 per cent, 2.5 per cent, seven per cent and five per cent next year.
All of Atlantic Canada’s markets are currently in seller’s territory, which is expected to prevail in 2022 with the exception of Charlottetown and Southern Nova Scotia. Large urban communities such as Moncton, Halifax and St. John’s have experienced a rise in out-of-province buyers, mainly from Ontario, who come seeking greater housing affordability. Average sale prices in Atlantic Canada could increase between five to 20 per cent next year.

RBC Economics

According to RBC economist Robert Hogue, potential homeowners should expect anticipated price growth in the near future but he also pointed out that housing price pressures would see some relief by the second act of 2022. “We expect extremely tight demand-supply conditions will keep prices under intense upward pressure in the near term though we see such pressure easing significantly by the second half of 2022 as markets achieve a better balance,” said Hogue.

Early reports from real estate boards showed that the temperatures of markets were “generally rising once again” as resales climbed to high levels in November. In communities like Toronto or the Fraser Valley, where resales were unchanged or had dipped slightly last month, this was mostly attributed to a lack of supply, not falling demand, Hogue explained. Although market trends over the past three months have flipped from the cooler periods recorded during the spring and summer, Hogue said that it is unlikely we’re seeing another “leg up in the market’s unprecedented run.” Instead, the current activity we’re witnessing is related to buyers “front-running interest rate increases,” a short-lived trend that is expected to fade in the coming months and lead to moderation.

“Our view remains that deteriorating affordability (arising from soaring prices or higher interest rates, or both) and easing pandemic restrictions will gradually cool demand in 2022,” said Hogue.

Royal LePage

The brokerage predicts that home values are expected to “rise strongly again in 2022, however at a slower pace compared to 2021.” The Royal LePage Market Survey Forecast predicts the aggregate price of a home in Canada will rise 10.5 per cent on an annual basis in 2022, up to $859,700.

By housing type, the median price of a single-family detached property would increase 11 per cent to $918,000, while the value of a condo would grow eight per cent to a median price of $594,000.

Royal LePage noted that pent-up demand from buyers who were unable to purchase in 2021, combined with the need for housing from newcomers to Canada and newly-formed households, would put upward pressure on prices in a market that is suffering from a “chronic supply shortage.” Meanwhile, heightened immigration targets from the federal government are likely to boost housing demand in large urban communities. Pent-up demand is expected to continue throughout winter, bleeding into the 2022 spring market.

“The lack of housing supply in Canada is a very real issue; one that cannot be solved overnight. While some believe that housing is now overvalued, signals point to a level of demand that will continue to outpace inventory, keeping prices rising on a steep upward trajectory,” said Phil Soper, president and CEO of Royal LePage, in a press release.

“That said, I do expect to see price appreciation ease from the unhealthy levels that we have been grappling with over the last 18 months.”

In the Greater Toronto Area, the aggregate price of a home in Q4-2022 is expected to increase 11 per cent annually to $1,256,500. In the same timeline, the median price of a single-family detached home will rise 10 per cent to $1,564,200, and up 12 per cent to $763,80 for condos. This is the only major region where the price appreciation of a condo is anticipated to exceed single-family homes, Royal LePage said.

In Greater Vancouver, aggregate prices in Q4-2022 are forecasted to jump 10.5 per cent year-over-year to $1,375,700. Single-family detached homes will see the median price rise 12 per cent to $1,892,800, and eight per cent to $766,800 for condos during the same period. The Greater Montreal Area is expected to see aggregate prices in Q4-2022 increase eight per cent to $564,800. The median price of a single-family detached home will rise nine per cent next year to $648,600, and condos up 6.5 per cent to $447,300.

CBRE

In its 2021 Canadian Real Estate Lenders’ Report, CBRE stated that lenders are feeling more optimistic about the real estate sector, a “significant shift” in lender sentiments over the past two years. As a result, two-thirds of lenders are planning to increase their portfolio allocations to real estate lending in 2022 and the remainder will maintain their current allocation levels, according to CBRE.

The report, which surveyed domestic and foreign lenders from early October to November, was generated to gauge lender confidence in commercial real estate and Canadian financing outlooks for 2022.

With the pandemic dominating most of 2020, many lenders were hesitant to make real estate deals. However, “increased clarity in the market” has prompted lending conditions to return to normal, with 90 per cent of lenders planning to “actively” or “very actively” bid on deals over the next 12 months.

This renewed bullishness from investors would translate into 10 per cent to 20 per cent of additional net new capital available for Canadian real estate next year. Approximately one in two lenders plan to materially increase their loan books by releasing 20 per cent to 30 per cent net new capital in the year ahead. Looking into the future, this means that borrowers can anticipate stronger capital availability for their real estate financing needs in 2022, CBRE said.

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