Mid-2021, predictions showed the coming year was expected to bring with it slow growth for the average home price and a more manageable housing market in Canada. Fast forward to January 2022, and while the change won’t be as intense as previous years, the forecast shows an increase of the average home price and significantly fewer options on the market.

While sales are expected to slow down in 2022, it’s only due to the lack of available housing options. For almost a decade, experts have been classifying Canada’s upward housing market trajectory as unsustainable and if a global pandemic followed by multiple recessions hasn’t been enough to cool it off, it’s fair for Canadians to wonder when conditions will change enough for them to have some hope in the face of increasing prices and dwindling properties.

Housing Sales And Price Forecast For 2022

The latest Market Survey Forecast from Royal Lepage is showing that Canada’s average home price is likely to rise by over 10% in 2022. This will bring it to $859,700 in the fourth quarter of 2022, with the median price of a single-family detached property projected to increase 11% to $918,000. It doesn’t take a mathematician to realize that making a down payment on a home in those price ranges can make the market entirely unapproachable for most buyers.

The Canadian Real Estate Association (CREA) projects a 12.1% decline in sales for 2022 but states that despite that, this year could still be the second-best year on record for home sales. Overall, there’s likely to be less of a frenzy, but the market is expected to remain strong regardless.

Construction Is Increasing, But There’s Still A Lack Of Housing Inventory

Most real estate experts agree that the market will remain hot in 2022, as it’s likely going to take quite some time to regain housing inventory. As a result, Canadians will have even fewer – and more expensive – homes to battle over than they did in 2021.

When it comes to construction, there seems to be no shortage of new builds popping up across the country. In fact, Royal Bank recently declared 2021 the best year for housing starts since 1977. While this boom in construction will be great news for home buyers in the next few years and beyond, it unfortunately does nothing to level the current imbalance of supply and demand.

Many experts agree that the only way to put a stop to this runaway housing market is to flood the space with more housing options than what’s needed. It’s important to note that such an amount of construction would take years to complete, if municipal guidelines even allowed for it. No big shifts are expected to take place in 2022, so if you’re planning to purchase a home this year, you can expect to face the same aggressive market – and experience the same anxiety and possible disappointment v buyers had to deal with in 2021.

Will Mortgage Rates Rise In 2022?

Inflation hit an 18-year high in October 2021, and as a result, the Bank of Canada is expected to respond by raising its overnight rate multiple times in 2022. Economists have noted that financial markets are bracing for three to five 25-basis point increases in the Bank of Canada’s lending rate next year, which would take it to 1% or even 1.5% from 0.25% today. Each one of those hikes should result in a similar increase in most lenders ‘variable mortgage rates, which means the prospect of higher borrowing costs could trigger another frenzied market while buyers desperately try to sneak in before mortgage rates rise.

Housing Markets In Canada That Will See The Biggest Increases

While Canada’s average home price is expected to rise by over 10% in 2022, there are some Canadian housing markets that are expected to see the biggest increases across the board. If you’re planning to buy or sell in these areas, you’ll want to pay close attention to the forecasted numbers from the Royal LePage Market Survey Forecast.

Vancouver

As always, Vancouver leads the way when it comes to price increases. While it will remain the most expensive market in the country, it doesn’t have the highest increases overall, with Toronto taking that top spot. Condo prices are still set to rise by 8% ($766,800) and detached homes by 12% ($1,892,800).

Halifax

The city of Halifax is projected to have one of the narrowest price gaps between condos and homes in 2022, with homes projected at $594,500 and condos coming in at $418,000. These costs are a far cry from the million-dollar differences in both the Vancouver and Toronto markets.

Toronto

In a predictable fashion, Toronto joins Vancouver in the lead for price increases. Interestingly enough, Toronto is forecasted to have higher increases than Vancouver in 2022 with the average price of a semi-detached home set to rise 10% to $1,564,200 in the GTA and condo prices likely to rise 12% bringing the average price to $763,800.

The Prairie Markets

As expected, the prairie markets will also see a continued rise in home and condo costs, but won’t see nearly as much change as the booming markets above.

Calgary & Edmonton

Expected to see a relatively modest increase of 5% – 6%, Calgary and Edmonton have some of the lowest condo prices in the whole country ($229,500 in Calgary and $184,800 in Edmonton) so it’s unsurprising that they continue to see growth as they catch up to other surrounding markets.

Will Prices Slow In 2023?

Current price increases have been forecast to slow significantly, to 5% in 2022 and 2% in 2023, according to a poll by The Financial Post of 15 market analysts which was conducted from November 17 to December 6, 2021. But with the lack of available housing inventory and The Bank of Canada’s expected rate increase, it’s looking like 2023 won’t bring with it significant relief. With higher pricing driving more Canadians out of the home buying market, it’s likely 2023 will continue to see an increase of renters and people seeking housing options further from expensive urban cores as they secure remote-work jobs.

Conclusion

Canada’s severe lack of housing inventory and predicted mortgage rate increases mean we’re in for another bumpy ride until the market stabilizes and manages to catch up with the demand. While record low mortgage rates and buyers’ desire for more space fueled the housing market in 2021, it’s still unknown what forces might shape it in 2022 and beyond.