For the second straight 12 months—and within the face of an ongoing pandemic—the Canadian actual property market has continued to defy gravity.
Projected figures for 2021 counsel dwelling gross sales will finish the 12 months 21% greater than 2020 (to a complete of 668,000 transactions), whereas dwelling costs will finish the 12 months up 21.2% to an annual common of $687,500, in keeping with the Canadian Actual Property Affiliation.
Tight provide has been a recurring theme, with CREA noting the months of stock measure has fallen beneath two months price of provide simply 4 instances in historical past: in February and March of 2021, and once more in October and November.
“Whereas value progress isn’t anticipated to be as excessive in 2022, most of the situations that supported it proper up till the top of 2021 will nonetheless be there on New 12 months’s Day,” CREA famous in its housing forecast.
Whereas dwelling value progress is anticipated to reasonable in 2022, low provide continues to be anticipated to maintain upward strain on costs for a lot of the 12 months, in keeping with varied forecasts that we’ve summarized beneath.
We’ve additionally recapped the newest rate of interest forecasts for 2022 from the bond market and from analysts on the Large 6 banks. Whereas the precise timing and tempo of any Financial institution of Canada strikes continues to be up within the air, it’s clear that price hikes are on the horizon.
CREA
- 2022 dwelling gross sales forecast: -8.6% (following a projected 21% enhance in 2021)
- 2022 dwelling value forecast: +7.6% (following a projected 21.2% enhance in 2021)
- Commentary: “Together with an unprecedented provide crunch, there are fairly a number of different components that can play necessary roles in Canadian housing markets in 2022. Ongoing sturdy demand from an unobservable however little doubt massive variety of households ready for brand spanking new listings to point out up might be one tailwind,” CREA mentioned. “There can even be headwinds, chief amongst them greater rates of interest. Whereas the Financial institution of Canada has set the stage for a tightening cycle of nonetheless indeterminate measurement to start as early as April of subsequent 12 months, mortgage charges have already began to maneuver greater, first this previous spring, and once more in the previous few months.”
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Royal LePage
- 2021 home value forecast: +10.5%
- Commentary: “Following greater than a 12 months of report value appreciation throughout the nation, Canadian dwelling values are anticipated to rise strongly once more in 2022, nonetheless at a slower tempo in comparison with 2021. Pent-up demand from consumers who had been unable to transact in 2021, coupled with the rising want for shelter from new family formation and newcomers to Canada, will proceed to place upward value strain on a market affected by a power provide scarcity.”
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RE/MAX
- 2022 home value forecast: +9.2%
- Commentary: “RE/MAX is anticipating regular value progress throughout the Canadian actual property market in 2022, with inter-provincial migration persevering with to be a key driver of housing exercise in lots of areas, primarily based on surveys of RE/MAX brokers and brokers…The continuing housing provide scarcity is prone to proceed, placing upward strain on costs.”
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RBC
- 2022 dwelling gross sales forecast: -19.8%
- 2022 home value forecast: +3.3%
- Commentary: “Our view stays that deteriorating affordability (arising from hovering costs or greater rates of interest, or each) and easing pandemic restrictions will progressively cool demand in 2022. We anticipate extraordinarily tight demand-supply situations will hold costs underneath intense upward strain within the close to time period although we see such strain easing considerably by the second half of 2022 as markets obtain a greater steadiness.”
- Link (data)
- Link (commentary)
TD
- 2022 home value forecast: +7%
- Commentary: “Increased rates of interest are doubtless on the way in which and our price forecasts suggest that they may exert a reasonable drag on housing demand. Nevertheless, a supportive macro backdrop, alongside stress assessments that provide ample room for charges to rise earlier than consumers are crowded out, ought to hold exercise holding above pre-pandemic ranges subsequent 12 months…Affordability has turn into a lot more durable because of the fast escalation of costs throughout the pandemic. That mentioned, Canada has in its previous managed to climate a state of affairs the place the cost-of-living state of affairs was even worse with out seeing a extreme retrenchment in exercise. And, each new and resale markets stay drum-tight, suggesting one other sturdy 12 months for value progress is within the playing cards for 2022.”
- Link (data)
- Link (commentary)
CIBC
- 2022 dwelling gross sales forecast: -15%
- Commentary: “General, we anticipate gross sales to fall by 15% in 2022, relative to the elevated stage seen in 2021—an atmosphere that’s in keeping with a notable deceleration in dwelling value inflation subsequent 12 months,” wrote economist Benjamin Tal. “This atmosphere can be prone to affect the relative worth of condos vs. single-indifferent items…Logic means that greater charges will channel extra exercise into the extra inexpensive rental market, leading to relative value outperformance in that market.”
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Fitch Scores
- 2022 home value forecast: +5-7%
- Commentary: “The slower progress might be pushed by an anticipated rise in rates of interest, inflationary pressures and declining affordability, which can dampen demand…Extra components that would hinder value progress are new macro-prudential measures (further stress assessments or new taxes on non-owner-occupied houses). These measures would additional restrict the variety of debtors who qualify for a mortgage or make it much less economical to personal a non-owner-occupied property, which in flip would restrict the variety of consumers out there (each new entrants and other people seeking to purchase an even bigger dwelling).
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Curiosity Fee Forecasts
Under are the newest price forecasts from the Large 6 banks. Averaging the forecasts, the Large 6 banks anticipate the in a single day price to rise about 1% by the top of 2022, which means 4 quarter-point price hikes by the Financial institution of Canada.
Waiting for the top of 2023, analysts from the large banks are calling for a further three price hikes, bringing the in a single day price to 1.75%.
Goal Fee: 12 months-end ’21 |
Goal Fee: 12 months-end ’22 |
Goal Fee: 12 months-end ’23 |
5-12 months BoC Bond Yield: 12 months-end ’21 |
5-12 months BoC Bond Yield: 12 months-end ’22 |
|
BMO | 0.25% | 1.25% | NA | 1.45% | 1.80% |
CIBC | 0.25% | 1.00% | 1.75% | NA | NA |
NBC | 0.25% | 1.50% | 1.75% | 1.40% | 1.90% |
RBC | 0.25% | 1.00% | 1.75% | 1.25% | 1.65% |
Scotiabank | 0.25% | 1.25% | 2.25% | 1.50% | 2.05% |
TD Bank | 0.25% | 1.00% | 1.75% | 1.35% | 1.90% |
In the meantime, the bond market is sustaining its forecast for extra aggressive price tightening by the Financial institution of Canada.
As of Tuesday, it’s nonetheless absolutely priced in for 5 quarter-point price hikes by the top of 2022, which might deliver the in a single day goal price to 1.50%.