With the escalating pace of the past two years behind us, clients are asking questions.
What is in store for 2022? Will the frenetic pace continue? Is this the year we can afford to buy a home?
To paraphrase the Toronto Regional Real Estate Board’s Market Outlook (TRREB)(2022), the coming year will be a hybrid of old and new. Some trends will continue, like the increasing cost of housing and tight market conditions.
But new themes will emerge alongside increasing interest rates and record-breaking immigration levels.
Let’s look at a few developments we can expect as we look ahead, according to TRREB’s Market Outlook Summary (2022):
#1. Total Home Sales
Total home sales are expected to be lower than the prior year but will nonetheless show strong results compared to previous years.
There are a few reasons why. First, higher borrowing costs are likely to stifle some purchases for buyers on the borderline of affordability, who may then decide to temporarily put off their home search.
Second, after the record home sales of 2021, the pool of buyers ready to make the big-ticket purchase will be smaller.
And third, with fewer houses available to buy, even the most willing buyer can’t purchase something that is not available.
#2. Higher Selling Price
The average selling price for all home styles is “expected to climb to $1,225,000, an approximate increase of 12 per cent when compared to last year.” (TRREB, 2022).
According to TRREB President Kevin Crigger (TRREB, 2022), we expect to see record levels of immigration in 2022. All these people will need housing. Further, economists anticipate strong job creation in above-average income sectors. This will lift consumer confidence for those looking to buy a home.
On the downside, the housing shortage continues which means fewer homes for sale and many buyers vying for them. This combination of factors is expected to push home prices up by 12 per cent, on average, in the coming year.
#3. Interest Rate Adjustments
Multiple interest rate hikes are expected in the coming year, which may or may not have a significant impact on the pace of housing sales.
Historically, interest rate increases have a dampening effect on the number of transactions. However, given that home buyers are now held to a higher qualification standard (aka the OSFI stress test), the expectation is that interest rate adjustments alone will not have same the inhibiting effect on consumers’ inclination to purchase as it has in the past.
In sum, we expect the first half of 2022 to be much the same as what we saw in 2021. Tight market conditions and accelerated pricing will continue to shape the landscape of home sales.
For the second half of the year, the expectation is that some interest rate hikes will begin to impact some buyers’ decisions to hold off on their purchase. At the same time, immigration will push pricing higher and further tighten market conditions.
All of this while first time buyers move more aggressively in the direction of more affordable condo apartments in the City of Toronto, and farther away from the elevated price points in the suburbs.
The good news is that buyers need not attempt to navigate the ever-changing real estate environment alone. Reach out to us today so we can help to provide guidance and information on the purchase or sale you are considering.***
Reference: Toronto Regional Real Estate Board (2022). News release. TRREB Unveils Key Market Drivers for 2022 and January Numbers.