The condo market in Toronto took the hardest hit of any city in Canada when residents fled in the early days of the pandemic. Listings soared, prices fell and a flood of vacant units sent rents downward.
Now they are not only rebounding but they are also expected to outstrip the price gains of much-coveted detached homes in Canada’s biggest city.
Royal LePage’s 2022 forecast, out this morning, predicts that the median price of a condo in Toronto will rise 12% to $763,800 by the last quarter of next year, beating the 10% gain that will take a detached home to $1,564,200.
The Greater Toronto Area is the only region in the country where condo gains are seen outpacing detached homes, but the gap is narrowing in other centres.
“Demand for condos has picked up significantly in recent months, especially in major cities like Toronto and Montreal,” said Karen Yolevski, Royal LePage’s chief operating officer. “This trend will continue in 2022, as entry-level buyers are priced out of more expensive property segments and the revival of the downtown core continues.”
Royal LePage is the second major realtor to forecast double-digit price gains for Canada’s housing market next year. Realtors see strong growth ahead, but down from the blistering 21.4% jump estimated for this year.
Earlier this month RE/MAX predicted that home prices will rise by 9.2% in 2022, with some of the strongest price growth in smaller centres in Atlantic Canada and rural Ontario.
Royal LePage is even more bullish, expecting Canada’s national aggregate home price to rise 10.5% to $859,700 by the end of 2022.
“The lack of housing supply in Canada is a very real issue, one that cannot be solved overnight,” said Royal LePage CEO Phil Soper. “While some believe that housing is now overvalued, signals point to a level of demand that will continue to outpace inventory, keeping prices rising on a steep upward trajectory.”
“That said, I do expect to see price appreciation ease from the unhealthy levels that we have been grappling with over the last 18 months.”
Soper said the emergence of the Omicron variant, paradoxically, may actually strengthen the real estate market, if it prolongs the ingredients that drove the pandemic boom such as low-interest rates, remote work and households stockpiling cash.
“All of these economic variables have been shown to stimulate housing activity,” he said.
Interest rate hikes will come eventually and the race to beat them should keep the market hot through the normally quiet winter season and into spring. Government plans to increase immigration should drive demand in large urban centres, said Royal LePage.
It sees the biggest gains in Toronto and Vancouver, with prices rising 11% and 10.5% respectively.
In Greater Vancouver, the median price of a detached home is expected to rise 12% to an eye-watering $1,892,800. Good luck first-time buyers.
In fact, the housing shortage here is so bad that inventory would have to double to return to a balanced market, said Randy Ryalls of Royal LePage Sterling Realty.
“Just about every listing receives multiple offers and ultimately sells above the asking price, many without conditions. This competitive environment makes it especially difficult for first-time buyers to transact,” he said.
Housing numbers for November suggest the resurgence of home prices in September and October after a cooling over the spring and summer was no fluke, said RBC senior economist Robert Hogue in a recent note.
Yet RBC is “unconvinced we’re witnessing the start of another leg up in the market’s unprecedented run.”
Hogue believes this latest surge is driven mostly by buyers eager to lock in a lower mortgage rate, which is usually a “short-lived phenomenon.”
“We expect extremely tight demand-supply conditions will keep prices under intense upward pressure in the near term though we see such pressure easing significantly by the second half of 2022 as markets achieve a better balance.”
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