A Return to ‘Normal’? The State of Real Estate in 2022
Last year was one for the real estate history books. The pandemic helped usher in a buying frenzy that led to a record number of home sales and a historically-high rate of appreciation, as prices soared by a national average of 19.9% year over year, according to the Canadian Real Estate Association.1
There were signs in the second quarter that the red-hot housing market was beginning to simmer down. In June, the pace of sales slowed while the average sales price dipped 5.5% below the springtime peak.2
But just when the market seemed to be cooling, home prices and sales volume ticked up again in the fall, leading the Royal Bank of Canada to speculate: “Canada’s housing market run has more in the tank.”3
So what’s ahead for the Canadian real estate market in 2022? Here’s where industry experts predict the market is headed in the coming year.
MORTGAGE RATES WILL CREEP UP
The Bank of Canada has signalled that it plans to begin raising interest rates in the “middle quarters” of this year.4 What does that mean for mortgage rates?
Expect higher variable mortgage rates to come. In fact, according to industry trade blog Canadian Mortgage Trends, some lenders have already begun raising their variable rates in preparation. And according to the site, “Current market forecasts show the Bank of Canada on track for seven quarter-point (25 bps) rate hikes by the end of 2023, with Scotiabank expecting eight rate hikes.”5
Since September, fixed mortgage rates—which follow the 5-year Bank of Canada bond yield—have also been climbing.5 Fortunately, economists believe the housing sector is well-positioned to absorb these higher interest rates.
Derek Holt, Scotiabank vice president and head of capital markets economics, told Canadian Mortgage Professional magazine in November, “The large increase in cash balances that occurred over the pandemic combined with the record-high amount of home equity on Canadian balance sheets, to me, paints a picture of a household sector that can manage the rate shock we’re likely to get.”4
What does it mean for you? Low mortgage rates can reduce your monthly payment, make it easier to qualify for a mortgage, and make homeownership more affordable. Fortunately, there’s still time to take advantage of historically-low rates. We’d be happy to connect you with a trusted lending professional in our network.
VOLUME OF SALES WILL DECREASE
A record number of homes were sold in Canada last year. The Canadian Real Estate Association estimates that 656,300 home purchases took place, which is an 18.8% increase over 2020.6 So it’s no surprise that the pace of sales would eventually slow.
The association predicts that, nationally, the number of home sales will fall by 12.1% in 2022, which would still make 2022 the second-best year on record.1
It attributes this relative slowdown to affordability challenges and a lack of inventory but expects sales volume to remain high by historical standards. “Limited supply and higher prices are expected to tap the brakes on activity in 2022 compared to 2021, although increased churn in resale markets resulting from the COVID-related shake-up to so many people’s lives may continue to boost activity above what was normal before COVID-19.”6
What does it mean for you? The frenzied market we experienced last year required a drop-everything commitment from many of our clients, so a slower pace of sales should be a welcome relief. However, buyers should still be prepared to compete for the best properties. We can help you craft a compelling offer without compromising your best interests.
THE MARKET WILL BECOME MORE BALANCED
In 2021, we experienced one of the most competitive real estate markets ever. Fears about the virus, a shift to remote work, and economic stimulus triggered a huge uptick in demand. At the same time, many existing homeowners delayed their plans to sell, and supply and labour shortages hindered new construction.
This led to an extreme market imbalance that benefitted sellers and frustrated buyers. According to Abhilasha Singh, an economist at Moody’s Analytics, “almost all indicators of housing market activity shot through the roof.” But, she continued, “The housing market is now showing signs of returning to earth.”7
The Royal Bank of Canada expects to see demand soften gradually as rising prices and interest rates push the cost of homeownership out of reach for many would-be buyers.3 And while the supply of available homes continues to remain low, according to Singh, “the pace of building in Canada remains elevated compared with historical averages thanks to low interest rates.”7
What does it mean for you? If you struggled to buy a home last year, there may be some relief on the horizon. Softening demand could make it easier to finally secure the home of your dreams. If you’re a seller, it’s still a great time to cash out your big equity gains! And with less competition and a slower pace of sales, you’ll have an easier time finding your next home. Reach out for a free consultation so we can discuss your specific needs and goals.
HOME PRICES LIKELY TO KEEP CLIMBING, BUT AT A SLOWER PACE
Nationwide, home prices rose an average of 19.9% in 2021. But the rate of appreciation is expected to slow down in 2022. The Canadian Real Estate Association forecasts that the national average home price will increase by 5.6% to $718,000 in 2022.6
Singh of Moody’s Analytics agrees that price growth will slow this year and could “reach a near standstill in late 2022 but avoid any significant contractions.”7
However, some experts caution against a “wait and see” mentality for buyers. “Affordability is unlikely to improve [this] year as prices should march higher, even as interest rates creep upwards as well,” Rishi Sondhi, an economist at TD Economics, told Reuters. “We think rate hikes will weigh on, but not upend, demand, as the macro backdrop should remain supportive for sales.”8
What does it mean for you? If you’re a buyer who has been waiting on the sidelines for home prices to drop, you may be out of luck. Even if home prices dip slightly (and most economists expect them to rise) any savings are likely to be offset by higher mortgage rates. The good news is that decreased competition means more choice and less likelihood of a bidding war. We can help you get the most for your money in today’s market.
WE’RE HERE TO GUIDE YOU
While national real estate numbers and predictions can provide a “big picture” outlook for the year, real estate is local. And as local market experts, we can guide you through the ins and outs of our market and the local issues that are likely to drive home values in your particular neighbourhood.
If you’re considering buying or selling a home in 2022, contact us now to schedule a free consultation. We’ll work with you to develop an action plan to meet your real estate goals this year.
3. Royal Bank of Canada -
4. Canadian Mortgage Professional Magazine -
6. Canadian Real Estate Association -
For many people the idea of retirement means freedom to travel, or maybe even enjoy hobbies you’ve been putting off with your busy work schedule. For others, retirement comes with dreams of homeownership abroad. Have you dreamt of restoring a crumbling villa in the south of France? Or how about spending your days on the beach in the Caribbean? Rest assured; you’re not alone! The good news is, there are those who have already forged the way who can offer you advice.
Countries may place restrictions on foreigners owning property, which is why it’s always important to speak with a REALTOR® with experience working internationally, before settling on a dream destination. REALTORS® work hard to stay on top of industry regulations and designations, In addition, they have access to CREA Global, a global directory of resources, professional development, and exclusive networking opportunities with other REALTORS® from across the globe. You should also look into specific visa requirements and other documentation to make sure you have everything you need before purchasing a home. Otherwise, you may be stuck with payments on a property that you’re not able to live in.
For example, terms and conditions vary from country to country in the EU and property ownership rules vary greatly between regions, including taxation of pensions and land transfer taxes. In France, you can expect to pay a 10% land transfer tax as a purchaser of any property.
Thomas Watkins, a real estate professional in Turks and Caicos says 90% of the buyers in the territory are from North America. He says there are no restrictions on foreigners owning property in Turks and Caicos, no capital gains on property transfers, and no estate or inheritance taxes which are all big attractions to potential retirees. However, for Turks and Caicos, there’s a one-time Stamp Duty charge payable to the Turks and Caicos Islands government when you purchase your property. If you’re considering the powdery sand beaches of the Caribbean, says Watkins, it’s important to know properties are in high demand.
“Many times, properties will be sold by the time buyers are able to make the trip!” he shares. Another reason to get a good REALTOR® before getting your heart set on your dream home!
As for financing your property abroad, several of Canada’s big banks offer overseas mortgages with a 20% down payment. Of course, cash is always king or there’s the possibility of a home equity line of credit, depending on what you currently own in Canada.
But, can you truly move full time to another country without losing your Canadian benefits? The short answer is no. You can stay six months abroad at one time before needing to come home to Canada to maintain your social insurance benefits, unless special circumstances apply. Living abroad can also affect how you file your taxes based on your residency status. It’s important to verify these things with the government before you make any permanent decisions to avoid future hiccups.
In 2014, Will and Laila (who have asked to keep their real names private) fell in love with the Turks and Caicos during a trip to the Caribbean Island to enjoy the sunshine. It became a regular trip for the couple, who eventually got married there a few years later. Logically, the next step was to start looking for property because, as Will said, “it was the one place we knew we’d always want to go back to.”
When they started shopping in earnest, they asked around for a real estate broker and decided on one well known in the area. They purchased a condo unit within walking distance to the beach, knowing it would be an easy rental until they are ready to retire.
“It’s important, if you’re doing it this way, that you’re prepared for unforeseen circumstances,” they warn. For them it was the pandemic and occasional repairs or tenants, but they still feel it’s all worthwhile.
“Our real estate broker lives just down the street and keeps an eye on things, that really helps,” they admit. “But it’s important to get to know the people around you so you can get things fixed when you aren’t there.”
It’s a sentiment echoed by Andrew Eddy, who moved to Provence, France 10 years ago. He bought a 17th century provincial farmhouse in various stages of disrepair and neglect. Eddy spent several years restoring it, and after a change in his personal circumstances, he followed his heart to Burgundy, having fallen in love with the area during his youth. His current project is restoring a 17th century Burgundian manor house.
“The first lesson, I would tell people dreaming of retiring in Europe, is to get to know the area you are moving to,” Eddy says. “Go for an extended holiday. Spend months there if you can. Save yourself a lot of money by being informed before you make the decision to buy.”
The time you spend visiting the country is a good opportunity to decide what kind of property you’re looking for. A 300-year-old fixer-upper might be something you want to tackle at 55, but maybe not so much at 75. It’s important to know your limits and what you’re hoping to gain out of your retirement.
When it comes to retiring overseas, the idea can be extremely enticing. However, there’s more to it than just finding a home you love and packing your bags! Before making any big real estate decisions, it’s important to speak with a REALTOR® who can help you sell your current home and connect you with the right resources to make sure everything is done properly.
The article above is for information purposes and is not financial advice or a substitute for financial counsel.
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