7 Things You Need to Know About Canada’s Real Estate Market in 2022

The ever-changing real estate market has been one of the major pillars of the economy, boosting income and contributing to overall prosperity. However, sometimes the whole model can have certain effects and get a bit out of control if certain regulations are not introduced on time. 

Different factors can influence the real estate market and potential fluctuations in prices. In Canada, the last two years have been tumultuous with a record-breaking rise, due to the pandemic and consumers’ lack of confidence in buying or investing. Even Canada’s Prime minister Justin Trudeau is taking steps to regulate the housing prices and make them more affordable, introducing new legislation and law regulations. The solutions should encourage first-time buyers and make it easier for them to get on with the purchase. Others are skeptical of these actions, not believing in their effectiveness, while the question remains whether we can accept change or not. With uncertainty around the corner, we’ll share some essential things you should expect in the upcoming period.

Rising interest rates 

The Bank of Canada has on several occasions talked of raising the interest rates on housing mortgages and credits in an attempt to stabilize the increasing demand for housing and rising prices, thereby prompting affordability. 

To understand what causes such fluctuations and changes, we took a look at the prices before the pandemic and during it. According to estimates, over one-quarter of buyers even during the coronavirus outbreak have been investors, and not first-time home-buyers. Repeated home buyers and investors, mostly foreign and some domestic, are causing the rising housing prices as the demand is hot across the whole country from coast to coast. 

Property investments have always been one of the most lucrative and prosperous investing strategies, with a promising profit over the years. It is no wonder that investors are constantly looking at the real estate market for potential opportunities, however, even during a period of economic instability and constant uncertainty, this trend lived on. The effect caused the rise of housing due to the high demand and consequently made it almost impossible for first-time buyers to make a serious move. The problem came to the attention of the government, and one step is putting forward a bill forbidding foreign investors to buy real estate for the next year or two. The hope is it will regulate the prices, however, critics suggest that this “part-time solution” is not sufficient enough to make amends. 

One solution promising to deal with the issue has been put forward by the Bank of Canada, looking to raise the interest rates thereby discouraging investors. The rising interest rates are known to dissuade investors and slow the rising prices, somehow stabilizing and devaluating the assets. 

However, until this is realized, investors still can easily compete with other residents over purchasing real estate in the country. The goal essentially is for the situation to be more similar to that before the Covid-19 outbreak, two years ago. Until then, first-time home-buyers will face enormous challenges, often crossing all their possibilities and going to the very limit of their affordability, getting into debt they cannot repay in due time just to get a chance at competing. One suggestion is to wait until the Bank makes final announcements and afterward wait for a period for prices to go “ back to normal”. 

A shortage in supplies 

Another problem, which has been the theme of hot debates over the past several months making it even a topic worth talking about in the next elections, is the shortage of housing supplies. The shortage of proper housing facilities and space will only increase the prices of current housing real estate, prompting the government to consider alternative solutions at putting a stop to the rising prices. 

What further contributes to the issue is a superflux of immigrants and new residents expected shortly, around 1,5 million “new” Canadians could add up to the current population. Imagine the numbers increasing and the housing staying the same, with competing parties getting a hold over most real estate due to sufficient funds, or a.k.a enough wealth to buy no matter the price. This calls for some new solutions, some government-financed. If you feel a bit lost in the whole ordeal, the best thing to do is to look for homes via a reliable site, such as eXp Realty Canada home search, allowing you to take a look at all the housing options across the country no matter the location. You can check the prices, make sure it is up to standards and of course within the desired price range. 

Talk of potential government solutions has been implementing strategies to the national housing issue, which would somehow encourage contractors to build more affordable houses, maybe even create completely new neighborhoods with the help of provincial governments, thereby coordinating a united action to build more and offer more to the one’s interested. Other solutions prompted for a less “invasive” strategy, one not requiring a large portion of government funds for construction projects. 

One alternative has been encouraging the current homeowners to sell, stimulating the decision with tax refunds, something we’ll talk about in the next paragraph. We can only hope for such initiatives to happen in the near future, as the current situation stands as it is. 

The market could change from “buyer” to “seller”

Interestingly enough, with the constant changes, rising prices, and lack of sufficient supplies, chances are that in the next year or two, we can easily expect the market to be a “seller” dominated one. This could change the landscape and make more “room” for others, thereby slowing down the increase in value triggered by the purchases made prior to and during the pandemic. 

This could be a great and more than an effective strategy for the new home–buyers, given that government initiatives of increasing the supplies are an unlikely scenario at least for now. The government even has recognized the potential of the solution, offering certain strategies and encouraging sellers to do so. The solution also talks of introducing tax refunds and re-evaluating the current taxes imposed, both by the municipal and provincial governments. Will it catch up, and can it be a new way of increasing supplies, thereby decreasing the current value of homes, we can only hope to see. 

Major cities are most affected 

The two major cities of Canada, the Vancouver area and Toronto, are by far the most affected areas by the changes going on in the real estate market. These cities, due to their economic prosperity and the many options they offer, have been the main target of investors and buyers, even first-time buyers, and with the decreasing supplies, you can only imagine how the superflux of people and investors affected the prices. 

Therefore, the two cities and any other major city within the borders, with economic potential, are prone to the changing market prices. We recommend looking at housing at more affordable sites, and maybe the remote areas as they have still not been drastically affected by the whole ordeal. The decision has always been a rather unattractive one, as the common notion is the distance and lack of economic prosperity. 

However, these cities and areas are promising terrains in the near future due to the dense population of major cities; at some point, the wave will move in the other direction. This would also release a lot of the pressure currently on the market.

Single-family homes are sought-after 

According to recent studies, the number of single-family homes across Greater Toronto and Vancouver has been plunging drastically as the demand has been high in recent years. From the 1970s until 2010, the population number and number of family homes have been rather stable, with the number of houses gradually following the population rise. 

However, as said, since 2010, the number of the populace has skyrocketed, due to more loose regulations on immigration and Canada becoming an attractive location for foreigners to live. There are other reasons contributing to the increasing number, such as economic stability, job prospects, and other surrounding factors. This surely created more labor and boosted the economy as the cash flow in, however, the housing did now follow the same pattern, thereby making single-family homes now a sought-after commodity and by far the most looked for in the current economy. 

Therefore, if you are thinking of buying a home, take into account these numbers and the rising prices. Simply, while population numbers have grown over the past decade, exponentially, new government initiatives to boost the construction of family homes and housing have been lacking as the funds were redirected to other sectors of the economy. The paradox has created later on the current situation as we know it and live in it. 

Potential inflation 

Inflation is essentially the increase of prices over a certain period of time. The cost of living depends on basic commodities and their prices. Again, in addition to this simple principle, what plays a crucial role is not only the price but rather the demand and the abundance of a resource or lack of it. Prices do change at different times and, of course, what can plunge a country into inflation is the change of one of the most crucial sectors of the economy. 

The housing issue of Canada is no exception in general, and although the issue most emphasized has been the lack of supplies, there is another counter-reaction to it, demand. The initial plan of the Bank of Canada to increase rates, thereby discouraging investors from buying, and making more room for regular and average consumers to purchase, can cause excessive demand and also inflation rates. 

In a normal situation, the demand for homes, and the increase in purchases is followed by a constant rise in supplies and new inventory meeting the demand. However, as the Bank tries to regulate the rates and stabilize the market, chances are it will do exactly the opposite. Yet again, in situations like such, sometimes certain majors have to be introduced in an attempt to make everything right or at least somehow stabilize it. 

Although the problem of inflation might appear, still introducing higher interest rates is a solution, while critics are debating whether it is an effective one. The problem of supply shortage still stays, and the solution to that is a bit more complicated. 

At some point, prices will go back to normal 

Although the bubble is created due to all the different factors influencing the economy, chances are the prices will eventually go back to normal. With government initiatives taking place, homeowners might sell their homes listing new and available real estate to the market. Investors will be discouraged by the rising rates to persuade and invest in the market, and inventory will at some point increase, if not due to construction initiatives then due to the market turning into a selling one at some time.

Although analysts are still skeptical of the near future and hope for the best scenario, it seems promising. Prices will flatten during the year, practically the attempts to stabilize certain aspects by destabilizing others will make a tie and increase the probability of stability. 

For the past year and a half, the real estate market has been a hot issue, with many people pointing out the several drawbacks of the economic model that allows for the hurried acquisition of homes without government limits on what may be purchased and to what degree. Another issue has been the unpredictability of the rising populace over the last decade and more, and the influx of immigrants crossing the border and thereby causing a shortage in housing supplies yet again contributing to the economy in terms of the labor force. 

Furthermore, with foreign investors looking for outputs for their wealth, the real estate market of any country with a promising economy is seen as a lucrative opportunity by investors to purchase and invest in properties. This essentially contributes to a certain instability when it comes to housing prices, creating a delicate situation. However, with all the changes coming, we can always hope for a better and brighter future.