Royal LePage forecasts double-digit home price growth in Canada in 2022

Omicron variant emergence may extend period of unusually strong real estate markets

  • The GTA is the only region where condominium price appreciation is forecast to outpace that of detached homes; prices expected to rise 12.0% year-over-year in 2022
  • Greater regions of Toronto and Vancouver forecast to see highest aggregate price appreciation at 11.0% and 10.5%, respectively
  • Detached home prices in Halifax expected to rise 10.5%, followed by the Greater Montreal Area and Ottawa (9.0%)
  • Housing markets are expected to be unusually active through the winter season

TORONTO, ON, December 15, 2021 – Following more than a year of record price appreciation across the country, Canadian home values are expected to rise strongly again in 2022, however at a slower pace compared to 2021. Pent-up demand from buyers who were unable to transact in 2021, coupled with the growing need for shelter from new household formation and newcomers to Canada, will continue to put upward price pressure on a market suffering from a chronic supply shortage. According to the Royal LePage Market Survey Forecast, the aggregate[1] price of a home in Canada is set to rise 10.5 per cent year-over-year to $859,700 in 2022, with the median price of a single-family detached property and condominium projected to increase 11.0 per cent and 8.0 per cent to $918,000 and $594,000, respectively.[2]

“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, Royal LePage. “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.”

Pent-up demand not addressed in 2021 is expected to continue through the normally quiet winter season and spill over into the spring market of 2022. In addition, the federal government’s plan to increase immigration levels will bring a surge of new demand, particularly in large urban centres.

Soper noted that Canada’s strong economy, healthy full-time employment trends, and paradoxically, the emergence of a new coronavirus variant, should all contribute to the strength of the country’s real estate market.

“While the emergence of another COVID-19 variant is disheartening, we can’t ignore its probable impact on our nation’s real estate market,” said Soper. “It is hard to imagine that the Bank of Canada will begin the inevitable campaign to dampen inflation through higher rates with much still to be learned about Omicron and cases on the rise again. Employers may back-off plans to mandate a return to the office, sustaining the hyper-focus on the importance of the home as a place to both live and work. And, normal travel and entertainment will again be curtailed, continuing the household cash stockpiling trend that has defined the pandemic era.

“All of these economic variables have been shown to stimulate housing activity,” Soper continued. “Many of those looking to purchase a home, whether their first, an upgrade, or a recreational property, stand able to take advantage of increased savings and record-low interest rates.”

Those who have been unable to transact are expected to return to the market in the new year, ahead of an expected increase to interest rates.

“While Omicron appears certain to delay the inevitable, monetary policy will eventually tighten in the face of uncomfortably high inflation,” said Soper. “When policy makers signal that a rate hike is on the way, we expect a pull-ahead effect, with buyers rushing to market before borrowing costs increase materially. Those who have pre-qualified with lower mortgage rates will also be under time constraints to transact.”

From a public safety standpoint, real estate brokerages and their professionals in the field are by now well versed in the safety protocols necessary to ensure the buying and selling process is safe for their clients.

While pandemic-related lockdowns and a mandate to work remotely drove up demand for larger homes with outdoor space from buyers who might typically have purchased condominiums, the property segment has rebounded as affordability wanes in the middle and upper ends of the market.

“Demand for condos has picked up significantly in recent months, especially in major cities like Toronto and Montreal,” said Karen Yolevski, chief operating officer, Royal LePage Real Estate Services Ltd. “The price appreciation gap between condominiums and detached properties is narrowing. This trend will continue in 2022, as entry-level buyers are priced out of more expensive property segments, and the revival of the downtown core continues. Young professionals and those seeking a vibrant entertainment scene generally gravitate to the city lifestyle.”

Royal LePage 2022 Market Survey Forecast Table:rlp.ca/2022forecast_table

MARKET SUMMARIES

Greater Toronto Area

In the Greater Toronto Area, the aggregate price of a home in the fourth quarter of 2022 is forecast to increase 11.0 per cent year-over-year to $1,256,500. During the same period, the median price of a single-family detached property is expected to rise 10.0 per cent to $1,564,200, while the median price of a condominium is forecast to increase 12.0 per cent to $763,800. The GTA is the only major region expected to see price appreciation in the condominium segment surpass detached homes in 2022.

“Condos in the city of Toronto and in the greater region have rebounded with vigour, after taking a harder hit than any other major urban centre in the country at the onset of the pandemic,” said Cailey Heaps, who leads the Heaps Estrin Team, Royal LePage Real Estate Services Ltd. “For a short period of time, prices dipped and an onslaught of vacant units sent rental rates downward, but that trend was short-lived. Not only have condo prices rebounded, competition is heating up as entry-level buyers see them as an affordable way to get onto the real estate ladder.”

While the winter months translate to a seasonal slowdown in the real estate market in some cities across Canada, Toronto’s housing market remains active year-round.

“As we saw last year at this time, cold weather and the holiday season will do little to slow activity in Toronto. With tight competition and the looming threat of an interest rate hike in the first half of 2022, those who can transact now will not wait until spring, especially if they can lock in a lower mortgage rate,” said Heaps. “A large number of newcomers are also expected to enter Canada next year and many of them will settle in the GTA, putting upward pressure on prices.”

Royal LePage 2022 Market Survey Forecast Table:rlp.ca/2022forecast_table

Greater Montreal Area

In the Greater Montreal Area, the aggregate price of a home in the fourth quarter of 2022 is forecast to increase 8.0 per cent year-over-year to $564,800. During the same period, the median price of a single-family detached property is expected to rise 9.0 per cent to $648,600, while the median price of a condominium is forecast to increase 6.5 per cent to $447,300.

While detached homes have been the most highly sought-after property type in 2021, strong demand for condominiums is expected to reemerge in the new year, as potential buyers face tight competition and rising prices in the detached and semi-detached segments; not to mention, the anticipated first increase to interest rates since March of 2020.

“The shortage of single-family homes is expected to boost demand in the condominium market in the coming year,” said Dominic St-Pierre, vice-president and general manager, Royal LePage Quebec. “Currently, condos are the only property type which are not being immediately absorbed. With an increase in interest rates on the horizon, it is expected that many first-time buyers will attempt to enter the real estate market before their reduced borrowing capacities price them out of the option of a larger home.”

St-Pierre expects multiple-offer scenarios will be less common in the coming year than they have been in 2021.

“I anticipate the increase of housing supply will be gradual at the start of the year, and more importantly once interest rates go up. This could address some of the pent-up demand and offer new opportunities to buyers.”

Provided the Omicron variant does not impact border restrictions again, immigration is expected to be a major driver of economic growth in 2022, and will contribute to an increased demand for housing in the Greater Montreal Area.

Royal LePage 2022 Market Survey Forecast Table:rlp.ca/2022forecast_table

Greater Vancouver

In Greater Vancouver, the aggregate price of a home in the fourth quarter of 2022 is forecast to increase 10.5 per cent year-over-year to $1,375,700. During the same period, the median price of a single-family detached property is expected to rise 12.0 per cent to $1,892,800, while the median price of a condominium is forecast to increase 8.0 per cent to $766,800.

“We’ve been experiencing a chronic shortage of housing supply for over a year, and inventory levels are steadily decreasing. This continues to be a main driver of price appreciation in Vancouver and the greater region,” said Randy Ryalls, managing broker, Royal LePage Sterling Realty. “Just about every listing receives multiple offers and ultimately sells above the asking price, many without conditions. This competitive environment makes it especially difficult for first-time buyers to transact.”

Ryalls added that inventory would have to double in order for the region to return to a balanced market, as demand continues to outpace supply.

“This time of year, it’s not uncommon to see a significant reduction in new listings as families prepare for the holiday season and winter months. This means we could be heading into January with historically low supply and pent-up demand from buyers who weren’t able to make a purchase in 2021,” said Ryalls. “If interest rates rise as expected, we are likely to see a surge in demand at the beginning. However, higher borrowing rates will eventually cool some of that demand in the entry-level segment of the market, as prices become too far out of reach for some would-be buyers.”

Following a devastating year of floods and fires in British Columbia, Ryalls noted that the impact on housing markets in and around the affected regions remains to be seen.

Royal LePage 2022 Market Survey Forecast Table:rlp.ca/2022forecast_table

Ottawa

In Ottawa, the aggregate price of a home in the fourth quarter of 2022 is forecast to increase 9.0 per cent year-over-year to $806,600. During the same period, the median price of a single-family detached property is expected to rise 9.0 per cent to $946,100, while the median price of a condominium is forecast to increase 6.0 per cent to $446,300.

“Demand is continuing to outpace supply in Ottawa and I believe it will remain strong in 2022, although the frenzied pace of the market is reducing in this final quarter of the year,” said Jason Ralph, broker and president, Royal LePage Team Realty. “We still have less than one month of inventory available. Compared to an ‘average year’, 2021 was exceptional, even if activity levels are beginning to slow.”

Ralph noted that demand is being driven by first-time buyers and retirees, while fewer GTA buyers are shopping for homes in Ottawa today than at the height of the pandemic.

“More than ever, local first-time buyers and newcomers to Canada are choosing to buy in Ottawa, as the region offers more green space and greater affordability than other major cities. Those looking in the city’s neighbouring suburbs will find themselves just a short commute from the downtown core,” said Ralph. 

Royal LePage 2022 Market Survey Forecast Table:rlp.ca/2022forecast_table

Calgary

In Calgary, the aggregate price of a home in the fourth quarter of 2022 is forecast to increase 6.0 per cent year-over-year to $610,600. During the same period, the median price of a single-family detached property is expected to rise 6.0 per cent to $689,000, while the median price of a condominium is forecast to increase 2.0 per cent to $229,500.

“Following the busiest September and October on record in Calgary, real estate demand continues to be very strong; enough to expect a very brisk spring market,” said Corinne Lyall, broker and owner, Royal LePage Benchmark. “Without a significant boost in inventory, we will continue to see upward pressure on prices. Even still, Calgary remains an affordable place to buy a home, compared to Canada’s other major cities.”

Lyall noted that major investments in revitalization projects in the downtown core, including a new stadium and an LRT line – the largest infrastructure investment in Calgary’s history – are contributing to a positive momentum that is making the city increasingly attractive to young buyers.

“Calgary is very attractive to young Canadians looking for affordable homes, good job opportunities and a more balanced lifestyle. Calgarians have access to mountains, lakes and national parks, without having to give up the comforts of city life,” said Lyall.

Royal LePage 2022 Market Survey Forecast Table:rlp.ca/2022forecast_table

Edmonton

In Edmonton, the aggregate price of a home in the fourth quarter of 2022 is forecast to increase 5.0 per cent year-over-year to $450,500. During the same period, the median price of a single-family detached property is expected to rise 6.0 per cent to $500,300, while the median price of a condominium is forecast to increase 1.0 per cent to $184,800.

“There are a lot of good news stories in the local economy, which continues to bolster the confidence of first-time buyers to enter the market and young owners to move up,” said Tom Shearer, broker and owner, Royal LePage Noralta Real Estate. “Demand continues to outpace available supply, particularly for homes in the half-million to $900,000 range.”

Shearer added that while winter weather does typically slow the Edmonton market, a surge of activity is expected once interest rates rise in 2022, as those who have secured a hold on a lower rate will look to make a purchase quickly.

“Heading into 2020, Edmonton’s economy was just beginning to normalize following years of recession. The real estate boom spurred by the global pandemic accelerated that recovery. Once borrowing costs increase to a certain level, the housing market will start to normalize to pre-pandemic levels once again.”

Royal LePage 2022 Market Survey Forecast Table:rlp.ca/2022forecast_table

Halifax

In Halifax, the aggregate price of a home in the fourth quarter of 2022 is forecast to increase 10.0 per cent year-over-year to $519,200. During the same period, the median price of a single-family detached property is expected to rise 10.5 per cent to $594,500, while the median price of a condominium is forecast to increase 8.0 per cent to $418,000.

“Halifax has approximately two weeks of available inventory. The chronic supply shortage is impacting sales volumes, which I expect will be lower in 2022, despite continued strong demand from buyers within and outside of the Maritimes,” said Matt Honsberger, broker and owner, Royal LePage Atlantic. “Out-of-province demand remains a main driver of price appreciation, and is expanding to areas outside of the city centre, including Annapolis Valley and other recreational regions a short drive from downtown.”

The provincial government has yet to approve a proposed tax on homebuyers who are not current residents of Nova Scotia. The tax, if passed, could have an impact on the rise in buyer demand which has come largely from Ontario over the past year and a half.

Honsberger noted that while buyers continue to be aggressive in their searches, some sellers will wait until spring to list their properties. This could result in a boost of inventory in the new year.

“Any additional supply is welcome in a market as competitive as this one. However, most sellers will also be looking to make a purchase in the same region,” added Honsberger. “A significant number of new developments are currently under way on the outskirts of Halifax, including in Dartmouth, Elmsdale, Lantz and Bedford. But, completion will take at least 18 to 24 months.”

Royal LePage 2022 Market Survey Forecast Table:rlp.ca/2022forecast_table

Winnipeg

In Winnipeg, the aggregate price of a home in the fourth quarter of 2022 is forecast to increase 6.0 per cent year-over-year to $372,100. During the same period, the median price of a single-family detached property is expected to rise 6.0 per cent to $413,400, while the median price of a condominium is forecast to increase 5.0 per cent to $255,200.

“Despite following a record year for real estate, 2021 has seen exceptional growth in Winnipeg,” said Michael Froese, broker and manager, Royal LePage Prime Real Estate. “Inventory is tighter today than at this time last year, and demand continues to rise. Half of the homes listed in the region are selling in multiple-offer scenarios, which was not the norm prior to the pandemic.”

Winnipeg remains a relatively affordable place to purchase a home and live, compared to other major cities in Canada. Froese noted that increased competition and low inventory are causing fatigue for both buyers and sellers. Many homeowners are hesitant to list their homes for sale, due to concern that they will not be able to find a new property to purchase.

“First-time buyers make up a large part of demand in the city. Many of them have decided to put their home searches on hold until spring, in the hopes there will be a boost in supply. It’s especially difficult for young buyers who are getting priced out of the detached home segment, which makes up about three quarters of our total housing stock,” added Froese. “Condo prices are increasing more rapidly, as demand for more affordable units rises.”

While the pace of the market typically slows during the winter months, Froese anticipates a brisk spring market is in store for Winnipeg.

Royal LePage 2022 Market Survey Forecast Table:rlp.ca/2022forecast_table

Regina

In Regina, the aggregate price of a home in the fourth quarter of 2022 is forecast to increase 6.0 per cent year-over-year to $376,300. During the same period, the median price of a single-family detached property is expected to rise 6.0 per cent to $408,100, while the median price of a condominium is forecast to increase 4.0 per cent to $208,000.

“November was a very busy month in Regina, although activity levels are likely to taper off as we head into the holiday season,” said Mike Duggleby, broker and owner, Royal LePage Regina Realty. “Unmet demand will return in the new year and continued supply shortages will result in a brisk spring market.”

Duggleby expects a renewed surge of demand from newcomers and first-time buyers will hit the market in the spring of 2022.

“Significant investment in the potash industry and canola processing will lead to new job creation in Regina, attracting more people to the region. This increased demand will continue to put upward pressure on prices in an already tight market.”

Duggleby expects a rise in condominium demand once Canada’s increased immigration targets are reached.

Royal LePage 2022 Market Survey Forecast Table:rlp.ca/2022forecast_table

For more information please get in touch by email at alasdair@royallepage.ca or call my direct line at 519-590-6118.

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