Following more than a year of record price appreciation, Greater Toronto Area (GTA) home values are expected to rise strongly again in 2022, albeit at a slower pace compared to 2021.
Pent-up demand from buyers who were unable to purchase a home this year, whether their first or an upgrade, is expected to continue through the normally quiet winter season and spill over into the spring market of 2022. The federal government’s plan to increase immigration levels will also bring a surge of new demand. Combined, there will be continued upward price pressure on a market suffering from chronic supply shortage.
According to the Royal LePage Market Survey Forecast, the aggregate price of a home in the fourth quarter of 2022 is forecast to increase 11% 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% to $1,564,200, while the median price of a condominium is forecast to increase 12% to $763,800.
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. As a result, the price appreciation gap between condos and detached properties is narrowing. This trend will continue as entry-level buyers are priced out of more expensive property segments and the revival of the downtown core continues. The GTA is the only region in Canada where condo price appreciation is forecast to outpace that of detached homes.
The emergence of another COVID-19 variant will also likely impact the real estate market. The Bank of Canada probably won’t begin the inevitable campaign to dampen inflation through higher rates with much still to learn 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. Many of those who have been unable to transact are expected to return to the market in the new year to take advantage of increased savings and record-low interest rates before they inevitably rise. When policymakers signal that a rate hike is on the way, buyers are expected to rush to market before borrowing costs increase materially. Those who have pre-qualified with lower mortgage rates will also be under time constraints to transact.