Let’s get out our crystal ball and take a look: No, they won’t drop.
What housing prices will most likely do is level off a bit. We probably won’t see sky-high appreciation rates as we saw over 2020 and 2021. Instead, the rates of appreciation will slow down as housing supply contracts and less new homebuyers enter the market. With interest rates expected to rise gradually starting in the near future, we’ll probably see one last surge of home buying, followed by a cool-down that is reminiscent of the pre-Covid market.
This will probably come as a relief to homebuyers who are afraid of getting priced out of the market as home values continue to rise. If you’re a home seller worried that your house won’t appreciate at all, don’t be afraid. Just because the market might slow down doesn’t mean it will stop appreciating because the same factors that kept Canadian real estate appreciating pre-Covid haven’t fundamentally changed.
If it sounds like we’re trying to predict the weather here, you’re not far off the mark. Everyone makes predictions about the market. You have to. The market is built on predictions. Home appreciation is driven in large part by the expectations of the future. We have to be careful not to put too large a stake in saying what will or won’t happen tomorrow.
Instead, it’s smarter, safer, and more useful to look at current trends and weigh the probability that they’ll change in the future. So let’s take a look at the main factors driving home prices in Canada and ask if they’ll stick around through 2022.
The Housing Supply
Canadian Real Estate is buyer rich and housing poor. There doesn’t seem to be any quick way out of this problem. In areas of high demand, namely the real estate in the Toronto Area and Vancouver, there simply aren’t enough houses to go around for everyone. Due to a litany of roadblocks, it’s very hard to get new construction going in and around Toronto. Add to that the fact that Toronto is running out of undeveloped land to build new housing on, and it’s not hard to see that Canada’s biggest city is facing a big problem.
So long as supply stays low across Canada, we can expect housing prices to continue to rise, thanks, in large part, to our next factor.
Demand
If housing supply is the immovable object of Canadian real estate, demand is the unstoppable force. Canadians, like everyone else, want homes. Even if younger generations trend more towards condos, everyone eventually wakes up to find out that owning your home is much better than renting it. That’s a fact that drives demand everywhere in the world, and in Canada that demand is insatiable.
And it’s not just Canadians that are looking anywhere they can for homes. Every year hundreds of thousands of people from across the globe move to Toronto and all parts of Canada looking for homes, adding to the demand that the Canadian housing supply physically cannot satisfy. If Canada can solve its supply crisis, the market could truly transform into one of the most vibrant in the world.
People want to live in Canada. People want to live the Toronto lifestyle or the Vancouver lifestyle. Nowadays, even the Calgary real estate market is on fire and Winnipeg as well as to small towns around Ontario and British Columbia. Just about everywher