The real estate market across Canada and more locally, in the Greater Toronto Area, is robust and resilient. Real estate is recognized nationally and internationally as a smart investment, with a wide variety of locations, choice and communities that make homes appreciate in value year after year.
After experiencing an unprecedented worldwide pandemic over the last two years, which brought new safety requirements to the home building industry; supply chain issues; and skilled labour shortages, the real estate market and home buyers are up for whatever challenges may come in 2022. Here is a look at some challenges the industry and home buyers may face in the next year when it comes to building and buying homes.
Some Challenges for Home Buyers
The main challenges for home buyers in the GTA are affordability; supply, choice and inventory of homes available; and the possibility of increasing interest rates.
Across the GTA, housing affordability continues to be a challenge and the biggest contributor is the lack of supply. According to a recent Scotiabank Economics report, entitled “Which Province Has the Largest Structural Housing Deficit?” there has been some good news in the last few years as the number of new homes to start construction has risen.
“There is some cause for optimism as housing starts rose sharply in 2021 and efforts across the country to address the supply deficiency are multiplying,” the report states.
“Despite these welcome signs we remain of the view that the shortage of housing relative to the population’s needs will continue to put upward pressure on prices and rents and reduce affordability. Much remains to be done by policymakers to help close the housing deficit.”
Not just in the GTA, but across the country, the report says real estate markets are encountering the same problem of demand far outstripping housing supply. With not enough homes to go around, prices continue to be pushed higher.
Will Interest Rates Go Up in 2022?
Rising interest rates could be a challenge for new home buyers this year and next and buyers who want to purchase before interest rates go up might be wise to get into the market sooner rather than later.
At the end of January, the Bank of Canada stated that the economy entered 2022 with considerable momentum. Strong employment growth, strong hiring intentions and wage gains are picking up.
Experts and financial institutions are divided on when interest rates could go up, but most forecasts suggest by the end of 2022, the target overnight rate could rise to 0.5%.
Work from Home Continues
There are going to be some key forces of change to the Canadian real estate market, according to a PWC report entitled, Emerging Trends in Real Estate 2022.
One of the big ones is the changing world of work and its impact on people’s perception of home.
In the last two years, the line between home and office has blurred. Homes also became classrooms during the pandemic, forcing people to look at their homes and their space differently.
The landscape for offices will continue to change in 2022. This will impact changing migration patterns, commutes and put an even greater focus on mixed-use communities.
Some experts believe the trend that saw some move from big cities to suburban communities in search of more space will level out, as Canada emerges from the pandemic and cities experience a return to the core and condo-living.
In the residential market, low interest rates, increased savings by some Canadians during the pandemic and the desire for more living space have helped boost the demand for housing and, consequently, home prices and affordability challenges.
Robust GTA Real Estate
With the forecasted end of pandemic conditions in 2022, the real estate market in the GTA is expected to remain strong and steady through this coming year.
In its recent Housing Market Outlook report, the Canada Mortgage and Housing Corporation predicted continued price growth through to 2023, though at slower rates than seen recently.
The outlook remains a seller’s market, with low inventory available, homes sell easily. With property in the GTA being so hard to come by, and its years-long trend in appreciation, values in the market will likely remain strong for at least a few years to come, according to the CMHC predictions.
For home buyers, who are trying to get in now before an impending increase in interest rates when large mortgages will be less affordable, the advice is to do your research and engage a team of experts to purchase a home that fits your lifestyle and budget.
Despite the global pandemic, many Canadians still feel confident in the real estate market, according to a Leger survey conducted on behalf of RE/MAX Canada, and 49 per cent of respondents believe Canadian real estate will remain one of their best investment options in 2022.
“Based on feedback from our brokers and agents, the inter-provincial relocation trend that we began to see in the summer of 2020 still remains very strong and is expected to continue into 2022,” says Christopher Alexander, President, RE/MAX Canada.
“Less-dense cities and neighbourhoods offer buyers the prospect of greater affordability, along with liveability factors such as more space. In order for these regions to retain these appealing qualities and their relative market balance, housing supply needs to be added. Without more homes and in the face of rising demand, there’s potential for conditions in these regions to shift further.”
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