Real Estate Market Outlook 2022

Sunday Dec 26th, 2021


2022 Real Estate Market Outlook for Southern Ontario

According to the RE/MAX broker network in Ontario, market activity across the province is anticipated to remain steady in 2022, with continued average price growth, although at widely varying degrees. RE/MAX brokers anticipate average sale price increases in Muskoka (20 per cent), Barrie(15 per cent), Niagara(14 per cent), Hamilton(16 per cent), where the move-over trend has remained strong. Meanwhile, in larger markets within the province, there’s a possibility that more immigration could weigh on supply levels and prices, including Durham (7 per cent); Brampton (8 per cent); Toronto (10 per cent); Mississauga (14 per cent), Oakville (7.5 per cent), Burlington(17 per cent).

When it comes to price appreciation year-over-year, there are a few regions that stood out in 2021 for their exponential increases across all property types, including Brampton, which rose from $869,107 in 2020 to $1,085,417 in 2021 (25 per cent); Durham from $706,818 in 2020 to $914,48 in 2021 (29 per cent); and London from $487,500 in 2020 to $633,700 in 2021 (30 per cent), Kitchener/Waterloo from $612,629 in 2020 to $785,607 in 2021 (28 per cent). In comparison, Toronto experienced a modest seven-per-cent increase year-over-year ($986,085 in 2020 to $1,054,922 in 2021).

The COVID-19 pandemic supercharged a market that already favoured sellers. With available listings hitting a record 14-year low before the pandemic, it is no wonder that housing prices have soared upward, with the Canadian Real Estate Association (CREA) forecasting the national average home price would rise a whopping 19.9 per cent on an annual basis to $690,000 in 2021. Low interest rates, economic support and lockdowns that drastically shifted the consumer appetite, contributed to a sharp increase in demand and consequently, price growth across virtually every market in Canada.

But did these changes cause real estate prices to become overvalued? According to Moody’s Analytics, a leading credit rating agency, this is most certainly the case. The firm’s forecasting model believes that real estate markets are overvalued by up to 91 per cent across Canada, with a 22.59-per-cent average in urban markets. The good news: despite this label, Moody’s is not expecting the bubble to burst, causing a housing crash. So, we can all let out a collective “phew”!

Can Higher Mortgage Rates Create a Dip?

Because of high inflation, the Federal Reserve will taper its purchase of mortgage-backed securities faster than originally planned. The program, which was put in place at the beginning of the pandemic, has resulted in the ultra-low mortgage rates over the past year and a half. Given the situation, they are expected to do 2 to 3 quarter point increases in 2022.

As per Moody’s Analytics, though real estate prices are overvalued, there is no expectation those prices are going to fall. Expectations are that higher mortgage rates will flatten the growth. As mortgage rates rise, their model is showing low to no price growth. Moody’s predicts that urban housing prices will rise 2.63 per cent from Q4 2021 to Q3 2022.

Let’s explore price trends, according to Moody’s in Southern Ontario:

The Toronto Real Estate Market

The Toronto housing market is overvalued by almost 40 per cent in Q2 2021, nearly double the national average. With no crash on the horizon, the numbers are forecast to hold steady in the coming years, with a growth of 0.86 per cent in 2022, followed by 0.05 per cent, Moody’s says. It’s bad news for anyone hoping the prices could dip to more affordable levels, but those who are looking to sell a Toronto property in the coming year can expect to enjoy the same generous profits as sellers in 2021.

The Most Overvalued Housing Markets Are All in Southern Ontario!

Neither Toronto nor Vancouver can lay claim to the most overvalued market in Canada; that honour belongs to Niagara. The Niagara area, including St. Catherine’s, is an astonishing 90.8 per cent above trends in Q2 2021, per Moody’s. There are small dips expected, but they are minor corrections in comparison to these massive gains.

Joining the Niagara real estate market near the top of the leaderboard of overvalued markets are Peterborough, Windsor, Hamilton and London.

What is federal Government planning to do?

Canada's federal government plans to take a tougher stand on investment properties by reviewing rules around down payments and policies to curb "excessive profits." As well as discouraging foreign investors from holding on to vacant homes and ban on blind bidding.

Overall, on one end where Remax report is sounding quite optimistic and Moody’s report is bit pessimistic about real estate trends expected in 2022. Basic fact remain that it is a game of demand and supply. Final Mortgage rate increases, Actual Omnicorn impact and which government measures get implemented in first quarter of 2022 will set the pace for balance of the year.  


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