So what will the year look like? 

Overall, many real estate groups and economists are undecided on the future of GTA real estate. However it would seem that the general consensus is that a climb in prices is likely – as is the potential for a price correction or plateau. 

That being said, don’t stress yet!  A significant correction would only see prices return to the still great values of a few years prior.

What we’ve learned over our years in real estate is that time is the only teller of truth!

Without further delay, we bring you our real estate predictions for 2022.

Prediction #1
Interest rates will go up – in increments.

It appears as though home owners and prospective buyers will finally see the rise in interest rates, a per the Bank of Canada.  The BOC allured to the increase in the latter part of 2021 and will likely follow through with it.

It in fact alluded to 5 incremental interest rate hikes.  However a hike of that kind may no longer be realistic thanks to unfortunate pandemic issues resurfacing this winter.

Economists like TD Bank’s Rishi Sondhi, BMO’s Douglas Porter and CIBC’s Benjamin Tal feel that three interest rates increases in 2022 are more likely, with the first occurring in April 2022.

Tal’s explanation is rationalized as:

“If you raise interest rates too quickly, especially from an extremely low rate and in an environment in which the debt load is relatively high, you shock the economy and you might plant the seeds for a 2023 recession by raising rates too quickly. Therefore, I think that the market is a bit too aggressive discounting five moves during the course of 2022 in this environment.” – Benjamin Tal

However all of the conversation around interest rates rising, does tend to put people into a panic – which isn’t necessary.

At the moment, home buyers are being approved based on the current mortgage stress test rate of 5.25%.  This is much higher than the actual bank prime rate, which as of today’s writing is 2.6%.

Thus, even though Canada at times feels as though it’s an over-protective parent with it’s lending practices.  In times such as these, they prove to be a very responsible measure put in place to ensure when interest rate increases do happen.  Those who need protection most, do inherit it!

If you’ve purchased a home or refinanced recently and are concerned. Speak to a mortgage professional to help alleviate the uncertainty!

Prediction #2

Prices will continue to rise – just a little while longer

The housing market of 2021 saw the average price of a home in the GTA break records, across almost every single category the Toronto Real Estate Board breaks out.

All things considered (condos,towns,detached etc.) and across the Greater Toronto Area (DT TO to Innisfil, Milton to Clarington) the average GTA home cost $1,157,000 in 2021.  That’s an increase of 24% over 2020.

Lack of inventory within the marketplace had Buyers fighting against one another helping to create that price creep.  There are just not enough homes for sale to keep up with demand.

As real estate consultants, working in the industry day in and day out, we saw first hand the affects of those price increases.

Bid after bid, month after month, homes prices crept up and up and up to the point that if Buyers didn’t buy in one particular month, they could then afford less and less of a house the following month.

It wasn’t segregated to one area of the GTA, although some more than others.

So what we do know is that people are tired of it.

Housing affordability is one of the hottest topics in the news next to the never ending Omnicron variant. Those who own homes feel overly grateful about the new found wealth they’re living in, while those who don’t, feel increasingly defeated.

We therefore would agree with CIBC’s Benjamin Tal when he forecasts that we will likely see an acceleration in sales activity in the beginning of the year, before people expect interest rates to rise.

“..people are seeing interest rates starting to rise and will get into the market before it’s too late, which means that you might see relatively strong activity and then in the second half of the year, as the economy improves, the housing market will slow down because what we are doing now is pulling activity from the future.” – Benjamin Tal

CREA, the Canadian Real Estate Association, too predicts a climb in prices. Highlighting Ontario as the most rapidly growing province in the country, with a projected price increase of 11.5%.

It’s going to get worse before it can get better.

We too agree, once interest rates start to hike up, and as Buyers tire or develop a “just say no” attitude of paying more and more and more each month, we could expect to see home prices finally level off and plateau mid-year and beyond.

Tal further predicts that the level off in latter 2022 will likely be in low-rise or detached homes more so than in condos.

The reason being is that condos are relatively less expensive in comparison and have not seen the crazy lift off in prices in the same capacity as the traditional home.

Prediction #3 

Condos are back by popular demand.

They took a hit in 2020, bounced back in 2021, and are here for the win in 2022.

Condominiums are set, poised and ready to be snapped up by hungry Buyers in 2022. 

Out bid over and over again in the low-rise housing market, not willing to drive 2 hours just to buy a house they can afford, Buyers turn to the most affordable commodity in front and closest to them.  Condos are the low hanging fruit, if you will.

Are they wrong?

Not in our opinion.  With the strength of the housing market being as it is.  It’s sincerely a Buyer’s best hope of home buying in the GTA.

If last year’s astronomical price increases taught us any lessons, it’s that it’s better to have your feet in the game than to be off on the sidelines getting further and further from the goal post over time.

Paying down a mortgage and eventually reaping the rewards of appreciation and future equity from that first time buy, gives Buyers a fighting chance of buying that dream home down the line.

Investors will also likely take note of condos prior to interest rates going up.

We think this and know that others are thinking the same.

When priced out of the detached market – Condos are the alternative next best step and prices of this housing category will likely rise, as does demand in 2022.