‘COVID catalyst’ to continue to stimulate the housing market: Soper | RENX
The Omicron variant of COVID-19 will likely act as a stimulus for Canada’s residential real estate market in 2022 by delaying central bank plans to raise interest rates, according to Royal LePage President and CEO Phil Soper.
“I believe this will cause policymakers, central banks (and the) Bank of Canada to take a break from their battle against inflation. In other words, it will delay aggressive interest rate hikes to fight inflation, ”he says.
Soper predicts that an interest rate hike expected in the second quarter will be pushed back to the second half of 2022. “I don’t see the emergence of a new variant, it is pushing cases up to levels we don’t have. seen throughout the pandemic, do more than delay tightening monetary policy.
With low interest rates set to continue, the Omicron variant is extending the period of “COVID catalyst” for residential real estate, which he notes is one of the sectors that flourished during the pandemic.
The housing market will stay warm
Soper was talking about the Royal LePage Market Research Forecast for 2022, which projects the overall price of a home in Canada to increase 10.5% year-on-year to $ 859,700 in 2022.
The brokerage predicts that median prices for a detached single-family property and condominium will increase by 11% and 8%, respectively, next year. That’s about half of the increases seen across much of the country in a “hyperkinetic” 2021 year, he says.
This remains a sellers’ market and while stocks are still very tight, they are slightly better than last spring and early summer “when things were uncomfortably out of balance”.
Soper adds that back-to-office terms are reduced and people continue to work from home, the Omicron variant “puts emphasis on housing and that spurs transactions.”
People’s homes have become their children’s offices and schools, and with reduced entertainment, restaurants and cinemas for an extended period during the pandemic, he notes. This will continue the trend of household cash reserve building that marked the pandemic.
“If you are going to live and work from home, you will take up as much space as you can afford in the community where you are willing to live.”
The multi-residential sector in Canada
However, while many Canadians would love to have large single family homes, economic reality dictates otherwise. This is good news for the multi-residential sector, which was hit hard at the start of the pandemic as people searched for more space.
As the price differential between single-family homes and entry-level condos widened, the pendulum has shifted in favor of multi-residential for homeowners and first-time buyers, he says.
He notes that in Metro Vancouver, single-family homes are expected to increase 12% in 2022 to $ 1.89 million, which is simply out of reach for many people. In contrast, condos in the city are expected to rise 8% to $ 766,800, “a lot of money but a fraction of (about) $ 2 million.”
The GTA is the only region where the appreciation in the price of condominiums is expected to exceed that of single-family homes, according to Royal LePage. Condominium prices are expected to increase 12% in 2022 to $ 763,800, while detached single-family properties are expected to increase 10% to $ 1.564 million.
First-time buyers in the GTA are focusing on condominiums because they are more affordable. The city is the number one destination for new Canadians and research from Royal LePage shows that immigrants overwhelmingly intend to rent condominiums during the first three years they live in Canada.
Immigration will generate new demand
Royal LePage also predicts that the federal government’s plan to increase immigration levels will lead to increased new demand, especially in large cities.
Canada is also the third largest host country for international students in the world, says Soper. The federal government has not started restricting visas for the 850,000 international students studying here, most of whom live in condos.
Additionally, while there are short-term question marks surrounding the latest variant, employment in the travel, tourism, entertainment, and food and beverage industries is expected to continue a long-term recovery. term. Many people in these areas rent condominiums, Soper says.
The condominium markets in Halifax, Montreal, Ottawa, Toronto and Vancouver will see strong activity in 2022, he predicts.
However, Calgary remains one of the few Canadian cities where there is an oversupply of condos and “really affordable entry-level condominium prices,” with prices rising 2% to $ 229,500.
Price differences in cities like Toronto and Calgary will continue to disrupt interprovincial migration patterns, Soper says.
“We will see more interest in Alberta in particular, and continued interest in Atlantic Canada, where homes are much cheaper than Vancouver, Toronto or Montreal.”