Housing and interest rate forecast 2022

For the second year in a row, and in the face of an ongoing pandemic, the Canadian real estate market continued to defy gravity.

Projected numbers for 2021 suggest home sales will end the year up 21% from 2020 (for a total of 668,000 transactions), while home prices will end the year up 21.2. % to reach an annual average of $ 687,500, according to the Canadian Real Estate Association.

Restricted supply has been a recurring theme, with ACI noting that months of inventory measurement fell below two months of supply just four times in history – in February and March 2021, and again in October. and November.

“While price growth is not as extreme in 2022, many of the conditions that supported it until the end of 2021 will still be there on New Years Day,” CREA noted in its lodging. provide.

While home price growth is expected to moderate in 2022, weak supply is still expected to keep upward pressure on prices for much of the year, according to various forecasts that we’ve summarized below.

We’ve also recapped the latest interest rate forecast for 2022 from the bond market and analysts at the Big Six banks. While the exact timing and pace of the Bank of Canada’s moves is still uncertain, it’s clear that rate hikes are on the horizon.

CREA

  • Forecast of 2022 home sales: -8.6% (after an expected increase of 21% in 2021)
  • 2022 house price forecasts: + 7.6% (after a projected increase of 21.2% in 2021)
  • Remark: “In addition to an unprecedented supply crisis, several other factors will play an important role in Canadian housing markets in 2022. Strong demand continues from an unobservable but arguably large number of households on hold. new entries downwind ”, declared the CREA. “There will also be headwinds, including higher interest rates. While the Bank of Canada has paved the way for a still-undetermined tightening cycle set to begin as early as April next year, mortgage rates have already started to rise, first last spring and then again in January. in recent months. “
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Royal LePage

  • Real estate price forecasts 2021: + 10.5%
  • Remark: “After more than a year of record price appreciation across the country, Canadian home values ​​are expected to rise sharply again in 2022, but at a slower pace compared to 2021. pent-up demand from buyers who don’t were unable to complete a transaction in 2021, coupled with the growing need for shelter from the formation of new households and newcomers to Canada, will continue to exert upward pressure on prices in a market suffering from a shortage chronicle of supply.
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RE / MAX

  • 2022 house price forecasts: + 9.2%
  • Remark: “RE / MAX expects sustained price growth in the Canadian real estate market in 2022, with interprovincial migration continuing to be a key driver of real estate activity in many regions, according to surveys of brokers and agents RE / MAX… the supply shortage is expected to continue, exerting upward pressure on prices.
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RBC

  • Forecast of 2022 home sales: -19.8%
  • 2022 house price forecasts: + 3.3%
  • Remark: “Our view remains that the deterioration in affordability (resulting from soaring prices or higher interest rates, or both) and the easing of pandemic restrictions will gradually cool demand in 2022. We Expect extremely long term supply and demand conditions, even though we see such pressure easing considerably by the second half of 2022, as the markets reach a better balance. “
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TD

  • 2022 house price forecasts: + 7%
  • Remark: “Higher interest rates are likely and our rate forecasts imply that they will exert a moderate drag on housing demand. However, a favorable macroeconomic backdrop, along with stress tests that provide ample leeway for rates to rise before buyers are squeezed out, should keep activity above pre-pandemic levels. next year… Affordability has become much more difficult due to the rapid escalation of prices during the pandemic. That said, Canada has in the past managed to overcome a situation where the cost of living situation was even worse without seeing a severe downturn in activity. And, both new and resale markets remain tight, suggesting another solid year of price growth is in the cards for 2022. “
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CIBC

  • Forecast of 2022 home sales: -15%
  • Remark:Overall, we forecast a 15% drop in sales in 2022, compared to the high level seen in 2021, a consistent environment with a notable deceleration of house price inflation next year, ”wrote economist Benjamin Tal. “This environment is also likely to have an impact on the relative value of condominiums compared to single-family homes.individual units…Logic suggests that higher rates will channel more activity into the more affordable condominium market, resulting in relative price outperformance in this market.
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Fitch reviews

  • 2022 house price forecasts: + 5-7%
  • Remark: “The slowdown in growth will be due to an expected rise in interest rates, inflationary pressures and declining affordability, which will dampen demand … Additional factors that could hamper price growth are new macroprudential measures (additional stress tests or new taxes on non-owners). – occupied apartments). These measures would further limit the number of borrowers eligible for a mortgage or make it less economical to own a non-owner occupied property, which in turn would limit the number of buyers in the market (both new entrants than people looking to buy a bigger house).
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Interest rate forecasts

Below are the latest rate forecasts from the Big 6 banks. Averaging the forecast, the Big 6 banks expect the overnight rate to increase by about 1% by the end of 2022, which means four rate hikes of a quarter of point by the Bank of Canada.

Looking ahead to the end of 2023, big bank analysts are calling for three more rate hikes, bringing the overnight rate to 1.75%.

Target rate:
End of year 21
Target rate:
End of year ’22
Target rate:
End of year ’23
Yield on 5-year BoC bonds:
End of year 21
Yield on 5-year BoC bonds:
End of year ’22
BMO 0.25% 1.25% N / A 1.45% 1.80%
CIBC 0.25% 1.00% 1.75% N / A N / A
CNB 0.25% 1.50% 1.75% 1.40% 1.90%
RBC 0.25% 1.00% 1.75% 1.25% 1.65%
Scotiabank 0.25% 1.25% 2.25% 1.50% 2.05%
TD Bank 0.25% 1.00% 1.75% 1.35% 1.90%

Meanwhile, the bond market maintains its forecast of a more aggressive rate tightening from the Bank of Canada.

On Tuesday, it is still fully factored in for five quarter-point rate hikes by the end of 2022, which would bring the target overnight rate to 1.50%.


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