Despite previous years’ challenges, Canada’s housing market continues to soar. Housing prices and buyers’ demand have risen steadily over the years, especially in hot markets in the Ontario province. However, with the prospect of an increase in interest rates threatening the eagerness of motivated buyers, experts forecast a significant change in Ontario’s housing market momentum. Many are pondering if this imminent shift will become the catalyst to bring the entire market crashing down.
What is the current trend in Ontario’s housing market?
According to WOWA, the average home price in Ontario in January experienced a price growth of $203,307 from January 2021’s average price of $795,322. Even if the transaction rate was notably lower than the previous year, as home sales in Brampton, Mississauga, and Toronto decreased by 19% year-over-year, home prices in these in-demand markets were unprecedented. The average sold prices in these three major cities went beyond the $1 million mark in January. On the other hand, the average home price sold in Ottawa, the nation’s capital, remains respectfully modest compared to other cities.
What should home sellers and buyers expect in 2022?
More bidding wars
During the latter part of 2021, inventories were already running low, even in minor markets in the province. Experts predict that bidding wars will remain fierce if supply does not increase, especially in the Toronto market. If housing construction continues to grow, it can certainly address the supply imbalance, preventing a crucial price increase in the housing market.
Fewer transactions
Even if Ontario’s market continues to boom, there’s a possibility that some consumers will invest their savings in non-real estate transactions. With the gradual shift to normalcy, Canadians will likely spend their extra money on expenses such as travel, dining, and recreation. Spending habits and priorities will considerably change in the coming months, leaving less for real estate investments.
An influx of new residents
With travel restrictions easing, experts estimate an increase in the housing demand from local and international home seekers. Students and migrants are expected to intensify the real estate demand, especially in the rental market. The government recently increased its immigrant target to 432,000 from its initial plan to welcome 411,000 new immigrants. This move is in accordance with their goal of boosting Canada’s economy and addressing labor shortages. These newcomers will likely settle in the major urban cities such as Toronto, thereby increasing the pressure on the housing supply.
Millennials will be a contributing factor
Several surveys suggest that Canadian millennials are more driven to become homeowners than their previous generations counterparts. As mortgage rates were reportedly low last year, many saw this as an opportunity to invest in real estate. Aside from the historically low rates, the current living situations and different housing needs of these millennials triggered their desire to own a property. Young Canadians are predicted to remain as one of the significant sources of homebuyers in 2022.
Will Ontario’s housing market dip this year?
With all these contributing factors, a market crash is unlikely to happen in the coming months. While the housing landscape will notably shift this year, especially with the expected increase in mortgage rates, Ontario’s housing market is forecasted to remain strong for most home sellers.