Homebuyers brace for continued price increases and tight competition this spring following double-digit gains in final quarter of 2021

Spring housing market poised for continued price growth following double-digit gains in fourth quarter

Fourth quarter highlights:

  • National aggregate home price increased 17.1% year-over-year in final quarter of 2021
  • 87% of the report’s 62 regions saw double-digit year-over-year aggregate price growth in Q4
  • 61% of the report’s 62 markets saw a quarterly aggregate price increase of 3% or greater
  • Kingston, Ontario, posts highest year-over-year aggregate and detached home price gains in Canada (38.1% and 44.3%, respectively)
  • High demand oustripping low inventory at start of 2022 signals further home price gains going into spring market

TORONTO, January 14, 2022 –According to the Royal LePage House Price Survey released today, the aggregate[1] price of a home in Canada increased 17.1 per cent year-over-year to $779,000 in the fourth quarter of 2021. Canada’s real estate market has sustained another year of record prices, as strong buyer demand continues to outpace supply in almost every market from coast to coast.

“Like a bad dream that disrupts your sleep for months on end, we ushered in 2022 with a fresh round of pandemic restrictions designed to combat a new wave of infections. Asked to stay away from the workplace and unable to travel even locally for entertainment, thousands of Canadians have been redirecting their growing savings into improving living conditions, as the family home doubles as office, restaurant and schoolroom,” said Phil Soper, president and CEO of Royal LePage. “It has been a busy winter in the housing industry and a very busy spring looms ahead.”

The Royal LePage National House Price Composite is compiled from proprietary property data, nationally and in 62 of the nation’s largest real estate markets. When broken out by housing type, the national median price of a single-family detached home rose 21.1 per cent year-over-year to $811,900, while the median price of a condominium increased 15.8 per cent year-over-year to $553,800. Price data, which includes both resale and new build, is provided by Royal LePage’s sister company RPS Real Property Solutions, a leading Canadian real estate valuation company.

Inventory

Eighty-seven per cent of the report’s markets posted double-digit year-over-year aggregate price increases, while 61 per cent of the markets saw a quarterly price increase of 3.0 per cent or greater, which is historically not typical of the Canadian real estate market in a fourth quarter.

“The shortage of homes available for sale or rent is one of the major social and economic challenges of our times,” noted Soper. “Policy makers at all levels of government may take comfort from 2022’s very modest improvement in the supply of available properties relative to demand, yet we see home prices rising at double-digit levels again this year.”

Canada’s chronic housing shortage pre-existed the pandemic and with growing household formation and more newcomers to Canada adding to demand, affordability threatens to erode again.

“Everywhere, in our largest urban centres, and in the nation’s small and medium-sized towns and cities, new homes are not being built fast enough to satisfy growing demand,” said Soper. “In addition to the slow and expensive regulatory processes that burden builders, construction has been hampered by pandemic-specific challenges, including labour shortages and the increased cost of construction materials as suppliers struggle with supply chain issues. Some developers have been hesitant to commit to new projects.”

Interest rates

Canada’s inflation rate reached an 18-year high[2] at the end of 2021, driven by increased costs to consumer goods, including gasoline and food, and significant delays in the supply chain. The Bank of Canada is expected to begin increasing its overnight lending rate incrementally later this year, which would result in higher mortgage rates.

“Many industry watchers expect the inevitable rise in borrowing costs will abruptly end the current seller’s market with its characteristic rising home values,” Soper said. “We are experiencing the first expansionary housing cycle, which began in the second quarter of 2020, since the introduction of the federal mortgage stress test. Buyers have had to qualify for a loan at a rate much higher than what they will actually pay, creating a significant buffer before they reach their capacity to manage larger payments.”

While rising interest rates slow house price appreciation, higher borrowing costs will be coming off historical lows and the increases may not be enough to offset the significant upward price pressure from Canada’s housing supply crisis.

Federal policy

Royal LePage supports policies that are supportive of transparency in the real estate process and that prioritize consumers’ best interests. One of the proposed changes by the Federal government is an end to blind-bidding in real estate transactions. While this would enhance transparency, it is not expected to improve affordability. Additionally, a one per cent tax on foreign-owned vacant properties, which came into effect on January 1st, is not expected to materially increase housing supply. The nationwide inventory shortage remains the culprit tied to eroding affordability.

“Policies that attempt to artificially quell demand in the face of growing household formation are distractions from Canada’s housing shortage crisis,” concluded Soper.

Immigration

As noted in previous releases, immigration remains one of the largest drivers of buyer demand. According to the Royal LePage Newcomer Survey, the average duration before newcomers purchase a home is three years after arrival and, nationally, 64 per cent rent their first home, spurring significant rental demand in large urban centres.[3]

In December, Royal LePage issued its 2022 forecast stating that the national aggregate price of a home is expected to increase 10.5 per cent year-over-year.

Royal LePage House Price Survey Chart:rlp.ca/house-prices-Q4-2021
Royal LePage Forecast Chart:
rlp.ca/market-forecast-Q4-2021

REGIONAL SUMMARIES

Greater Toronto Area 

The aggregate price of a home in the Greater Toronto Area increased 17.3 per cent year-over-year to $1,119,800 in the fourth quarter of 2021. Broken out by housing type, the median price of a single-family detached home increased 22.4 per cent to $1,421,200, while the median price of a condominium increased 14.8 per cent to $665,400 during the same period.

“If the fourth quarter of 2021 is any indication of what is in store for the GTA housing market in the coming months, buyers can expect tight competition through the spring, as demand continues to outpace supply across the region and in every segment of the market,” said Karen Yolevski, chief operating officer, Royal LePage Real Estate Services Ltd. “This competition will continue to put upward pressure on prices, pushing some buyers to increase their budgets, expand the parameters of their geographical search or consider a different housing type.”

In the city of Toronto, the aggregate price of a home increased 8.1 per cent year-over-year to $1,138,000 in the fourth quarter of 2021. During the same period, the median price of a single-family detached home increased 12.5 per cent to $1,580,500, while the median price of a condominium increased 13.8 per cent to $711,200.

“As affordability continues to wane in the downtown core and the greater region, demand for condominiums is increasing. Many first-time buyers, as well as those who have been priced out of the detached segment over the last year, see condos as an opportunity to enter the real estate market. Without a significant and speedy boost in housing supply, major urban centres like Toronto will remain firmly in a seller’s market.”

Yolevski noted that while many towns and smaller cities in the Golden Horseshoe have been affected by the trend of Torontonians migrating outside the city since the onset of the pandemic, most newcomers expected to enter Canada in 2022 will settle in one of the three largest urban centres. This will increase competition in both the resale and rental markets.

In December, Royal LePage issued a forecast projecting that the aggregate price of a home in the Greater Toronto Area will increase 11.0 per cent in the fourth quarter of 2022, compared to the same quarter in 2021.

Royal LePage House Price Survey Chart:rlp.ca/house-prices-Q4-2021
Royal LePage Forecast Chart:
rlp.ca/market-forecast-Q4-2021

Greater Montreal Area 

The aggregate price of a home in the Greater Montreal Area increased 19.7 per cent year-over-year to $532,600 in the fourth quarter of 2021. Broken out by housing type, the median price of a single-family detached home increased 20.0 per cent to $595,500, while the median price of a condominium increased 18.2 per cent to $428,900 during the same period. The condominium market posted the fastest price growth of all housing types reported in the fourth quarter of 2021 in the Greater Montreal Area.

“The real estate market behaved as expected, with strong price growth in the first half of the year, followed by easing price gains towards the end of 2021,” said Dominic St-Pierre, vice-president and general manager of Royal LePage for the Quebec region. “Real estate demand slowed slightly, as vaccination rates ramped up and health restrictions decreased during the second part of the year. However, the rate of price appreciation in the Greater Montreal Area during the fourth quarter of 2021, compared to the same period in 2020, proved to be robust. While we reported a significant increase in the year-over-year aggregate price, the strongest price growth occurred in the first six months of 2021,” he added.

In Montreal Centre, the aggregate price of a home increased 10.7 per cent year-over-year to $669,500 in the fourth quarter of 2021. During the same period, the median price of a single-family detached home increased 15.3 per cent to $1,101,500, while the median price of a condominium increased 6.2 per cent to $509,900.

“The rate of home price appreciation that we have seen since the start of the pandemic is closely tied to the fact that consumers’ housing needs have changed,” said St-Pierre. “The home has become the place for all personal and professional activities, and just when we thought we could go back to our usual activities, remote work became mandatory again, and entertainment options, more limited. With the stricter health measures announced in December, demand for real estate is not likely to decrease and we expect a brisk first quarter in Greater Montreal.”

St-Pierre noted that historically, the month of January is known to post the highest count of new listings. However, he expects any new inventory will be absorbed very quickly.

In December, Royal LePage issued a forecast projecting that the aggregate price of a home in the Greater Montreal Area will increase 8.0 per cent in the fourth quarter of 2022, compared to the same quarter in 2021.

Royal LePage House Price Survey Chart: rlp.ca/house-prices-Q4-2021
Royal LePage Forecast Chart: rlp.ca/market-forecast-Q4-2021

Greater Vancouver 

The aggregate price of a home in Greater Vancouver increased 17.1 per cent year-over-year to $1,253,300 in the fourth quarter of 2021. Broken out by housing type, the median price of a single-family detached home increased 23.3 per cent to $1,707,900, while the median price of a condominium increased 12.6 per cent to $717,200 during the same period.

“The supply of available homes in every property segment has reached historic lows, meaning prices can only move up,” said Randy Ryalls, general manager, Royal LePage Sterling Realty. “And, because the inventory shortage cannot be solved quickly, tight competition and rising prices are likely to persist for the foreseeable future.”

Ryalls noted that multiple-offer scenarios are the norm, and most properties listed sell over the asking price, usually without conditions.

In the city of Vancouver, the aggregate price of a home increased 15.4 per cent year-over-year to $1,375,000 in the fourth quarter of 2021. During the same period, the median price of a single-family detached home increased 14.4 per cent to $2,498,000, while the median price of a condominium increased 6.5 per cent to $788,400.

“We’ve begun the year with a record low number of homes for sale. Buyers who were unable to transact in the final quarter of 2021 will resume their search, in addition to new demand which normally arrives to the market toward the spring. Without a significant increase in the inventory of available homes, and with the possible impact of the emergence of Omicron, upward pressure on prices will persist and sales volumes are not likely to increase in the near term,” added Ryalls.

In December, Royal LePage issued a forecast projecting that the aggregate price of a home in Greater Vancouver will increase 10.5 per cent in the fourth quarter of 2022, compared to the same quarter in 2021.

Royal LePage House Price Survey Chart: rlp.ca/house-prices-Q4-2021
Royal LePage Forecast Chart: rlp.ca/market-forecast-Q4-2021

Ottawa

The aggregate price of a home in Ottawa increased 17.2 per cent year-over-year to $739,700 in the fourth quarter of 2021. Broken out by housing type, the median price of a single-family detached home increased 20.0 per cent to $876,600, while the median price of a condominium increased 11.5 per cent to $417,700 during the same period.

“The Ottawa housing market continued to see strong demand in the fourth quarter of 2021. And, I expect the looming threat of interest rate hikes will further spur demand in the first half of this year,” said John Rogan, broker of record, Royal LePage Performance Realty. “Although we are seeing fewer multiple-offer scenarios than earlier in the pandemic, competition remains tight due to a shortage of supply.”

Rogan added that housing demand is largely driven by millennials looking to enter the market. He noted that most buyers in this demographic have two incomes, affording them a substantial monthly budget. However, securing a sizable down payment can be difficult.

“Young Canadians value homeownership, and they want to get on the real estate ladder as soon as possible,” said Rogan. “With inventory reaching historic lows, navigating the housing market has become increasingly challenging for both buyers and sellers. If this level of demand continues, without a significant increase in supply, Ottawa will remain in a firm seller’s market through 2022.”

In December, Royal LePage issued a forecast projecting that the aggregate price of a home in Ottawa will increase 9.0 per cent in the fourth quarter of 2022, compared to the same quarter in 2021.

Royal LePage House Price Survey Chart:rlp.ca/house-prices-Q4-2021
Royal LePage Forecast Chart:
rlp.ca/market-forecast-Q4-2021

Calgary 

The aggregate price of a home in Calgary increased 9.0 per cent year-over-year to $576,800 in the fourth quarter of 2021. Broken out by housing type, the median price of a single-family detached home increased 11.6 per cent to $650,800, while the median price of a condominium increased 3.0 per cent to $224,700 during the same period.

“Calgary’s real estate market finished the year strong, and I believe the trend will continue into the spring market of 2022. As demand continues to outpace supply in one of the country’s most affordable major cities, prices are expected to continue increasing,” said Corinne Lyall, broker and owner, Royal LePage Benchmark. “A lack of inventory, especially in the lower end of the detached market, continues to drive price appreciation and create an increasingly competitive environment for first-time buyers.”

Lyall noted that the city’s real estate market is facing an inventory shortage across all property types, with the exception of condominiums.

“A booming job market, quality of life and affordability are among the top factors contributing to the current increase of demand for housing in Calgary,” added Lyall. “Pent-up demand deferred to the new year is likely to spur a brisk spring market.”

In December, Royal LePage issued a forecast projecting that the aggregate price of a home in Calgary will increase 6.0 per cent in the fourth quarter of 2022, compared to the same quarter in 2021.

Royal LePage House Price Survey Chart: rlp.ca/house-prices-Q4-2021
Royal LePage Forecast Chart: rlp.ca/market-forecast-Q4-2021

Edmonton 

The aggregate price of a home in Edmonton increased 5.0 per cent year-over-year to $428,400 in the fourth quarter of 2021. Broken out by housing type, the median price of a single-family detached home increased 11.6 per cent to $469,900, while the median price of a condominium decreased 2.0 per cent to $193,600 during the same period.

“The positive momentum of Edmonton’s economy, and the relative affordability of the city, continues to drive demand from first-time buyers and young professionals looking to move up in the housing market,” said Tom Shearer, broker and owner, Royal LePage Noralta Real Estate. “As strong demand continues to outpace housing supply, house prices will remain on their upward trajectory.”

Shearer noted that new developments continue to be challenged by the increasing costs associated with labour and building material shortages, as well as a sense of hesitancy among developers, spurred by uncertainty surrounding pandemic recovery.

“The supply shortage remains a major roadblock for would-be buyers, and continues to apply upward pressure to prices. I expect we’ll see a surge of demand in the first half of 2022, ahead of expected interest rate hikes,” added Shearer.

In December, Royal LePage issued a forecast projecting that the aggregate price of a home in Edmonton will increase 5.0 per cent in the fourth quarter of 2022, compared to the same quarter in 2021.

Royal LePage House Price Survey Chart: rlp.ca/house-prices-Q4-2021
Royal LePage Forecast Chart: rlp.ca/market-forecast-Q4-2021

Halifax

The aggregate price of a home in Halifax increased 12.6 per cent year-over-year to $484,800 in the fourth quarter of 2021. Broken out by housing type, the median price of a single-family detached home increased 15.4 per cent to $543,000, while the median price of a condominium increased 13.6 per cent to $388,500 during the same period.

“A lack of available housing supply has left many buyer hopefuls disappointed. As such, unmet demand from the fourth quarter of 2021 will spill over into the new year, with the hope that the spring market will bring with it some much-needed additional inventory,” said Matt Honsberger, broker and owner, Royal LePage Atlantic. “Without a significant increase of new listings, the number of sales will likely slow as prices continue to rise.”

Honsberger added that out-of-province buyers continue to be a major driver of demand and price appreciation in Halifax and the surrounding neighbourhoods.

“As we enter yet another phase of pandemic-related restrictions, the need and desire for more space and the option to work remotely continue to make the Maritimes a very attractive place to live for people from all across Canada,” said Honsberger.

The provincial government is still considering a proposed tax on non-resident homebuyers in Nova Scotia.

In December, Royal LePage issued a forecast projecting that the aggregate price of a home in Halifax will increase 10.0 per cent in the fourth quarter of 2022, compared to the same quarter in 2021.

Royal LePage House Price Survey Chart: rlp.ca/house-prices-Q4-2021
Royal LePage Forecast Chart: rlp.ca/market-forecast-Q4-2021

Winnipeg 

The aggregate price of a home in Winnipeg increased 9.6 per cent year-over-year to $357,200 in the fourth quarter of 2021. Broken out by housing type, the median price of a single-family detached home increased 14.7 per cent to $390,800, while the median price of a condominium increased 16.1 per cent to $233,600 during the same period.

“Inventory shortages caused a lot of buyer fatigue in the fourth quarter, especially among first-time homebuyers, which means a lot of that pent-up demand will be transferred to this year,” said Michael Froese, broker and manager, Royal LePage Prime Real Estate. “I expect a brisk spring market as young buyer hopefuls compete to secure a purchase before borrowing costs increase significantly.”

Froese noted that the city’s condominium segment is seeing strong price appreciation, as low supply of detached homes continues to drive demand for more affordable units.

“Detached homes are typically the most highly sought-after housing type in Winnipeg. However, some buyers are considering alternative property types that are more affordable. I expect this trend to continue into the spring,” added Froese.

In December, Royal LePage issued a forecast projecting that the aggregate price of a home in Winnipeg will increase 6.0 per cent in the fourth quarter of 2022, compared to the same quarter in 2021.

Royal LePage House Price Survey Chart: rlp.ca/house-prices-Q4-2021
Royal LePage Forecast Chart: rlp.ca/market-forecast-Q4-2021

Regina 

The aggregate price of a home in Regina increased 13.2 per cent year-over-year to $360,100 in the fourth quarter of 2021. Broken out by housing type, the median price of a single-family detached home increased 15.9 per cent to $387,800, while the median price of a condominium increased 13.4 per cent to $204,300 during the same period.

“Regina’s housing market remained strong through November and December, which are traditionally slower months in the region,” said Mike Duggleby, broker and owner, Royal LePage Regina Realty. “I hope to see an increase in supply in the spring, to help satisfy some of the pent-up demand. Better weather conditions will likely entice sellers to list their properties.”

Duggleby added that constraints in the supply chain resulting in low supply of building materials continue to delay new construction projects.

“New housing supply is not being created fast enough to keep up with growing demand. As Canada looks to increase its immigration targets in 2022, competition among buyers will remain tight and prices will continue to rise,” said Duggleby.

Duggleby expects new job creation in the potash industry and canola processing sector will be a main driver of demand in the region over the coming year.

In December, Royal LePage issued a forecast projecting that the aggregate price of a home in Regina will increase 6.0 per cent in the fourth quarter of 2022, compared to the same quarter in 2021.

Royal LePage Home Price Data:

Royal LePage House Price Survey Chart: rlp.ca/house-prices-Q4-2021
Royal LePage Forecast Chart: rlp.ca/market-forecast-Q4-2021

Royal LePage Royalty-Free Media Assets:

Royal LePage’s media room contains royalty-free assets, such as images and b-roll, that are free for media use.

About the Royal LePage House Price Survey

The Royal LePage House Price Survey provides information on the most common types of housing, nationally and in 62 of the nation’s largest real estate markets. Housing values in the Royal LePage House Price Survey are based on the Royal LePage Canadian Real Estate Market Composite, produced quarterly through the use of company data in addition to data and analytics from its sister company, RPS Real Property Solutions, the trusted source for residential real estate intelligence and analytics in Canada. Commentary on housing and forecast values are provided by Royal LePage residential real estate experts, based on their opinions and market knowledge.

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

For more interesting articles and videos please visit;

Website, http://www.alasdair.ca

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