03 Feb Spring housing market
Spring housing market poised for continued price growth following double-digit gains in fourth quarter
The following are the fourth quarter highlights condensed from the Royal LePage House Price Survey:
The aggregate price of a home in the Greater Toronto Area increased 17.3 per cent year-over-year, to $1,119,800, in the fourth quarter of 2021. Determined by housing type, the median price of a single-family detached home increased 22.4 per cent, to $1,421,200, while the median price of a condominium increased 14.8 per cent, to $665,400, during the same period.
“If the fourth quarter of 2021 is any indication of what is in store for the GTA housing market in the coming months, buyers can expect tight competition through the spring, as demand continues to outpace supply across the region and in every segment of the market,” said Karen Yolevski, chief operating officer at Royal LePage Real Estate Services Ltd. “This competition will continue to put upward pressure on prices, pushing some buyers to increase their budgets, expand the parameters of their geographical search or consider a different housing type.”
In the city of Toronto, the aggregate price of a home increased 8.1 per cent year-over-year, to $1,138,000, in the fourth quarter of 2021. During the same period, the median price of a single-family detached home increased 12.5 per cent, to $1,580,500, while the median price of a condominium increased 13.8 per cent, to $711,200.
“As affordability continues to wane in the downtown core and the greater region, demand for condominiums is increasing. Many first-time buyers, as well as those who have been priced out of the detached segment over the last year, see condos as an opportunity to enter the real estate market. Without a significant and speedy boost in housing supply, major urban centres like Toronto will remain firmly in a seller’s market.”
Yolevski noted that while many towns and smaller cities in the Golden Horseshoe have been affected by the trend of Torontonians migrating outside the city since the onset of the pandemic, most newcomers expected to enter Canada in 2022 will settle in one of the three largest urban centres. This will increase competition in both the re-sale and rental markets.
In December, Royal LePage issued a forecast projecting that the aggregate price of a home in the Greater Toronto Area will increase 11.0 per cent in the fourth quarter of 2022, compared to the same quarter in 2021.
Inventory
“The shortage of homes available for sale or rent is one of the major social and economic challenges of our times,” said Phil Soper, president and CEO of Royal LePage. “Policy makers at all levels of government may take comfort from 2022’s very modest improvement in the supply of available properties relative to demand, yet we see home prices rising at double-digit levels again this year.”
Canada’s chronic housing shortage pre-existed the pandemic and with growing household formation and more newcomers to Canada adding to the demand, affordability is being threatened again.
“Everywhere, in our largest urban centres, and in the nation’s small and medium-sized towns and cities, new homes are not being built fast enough to satisfy growing demand,” said Soper. “In addition to the slow and expensive regulatory processes that burden builders, construction has been hampered by pandemic-specific challenges, including labour shortages and the increased cost of construction materials as suppliers struggle with supply chain issues. Some developers have been hesitant to commit to new projects.”
Interest rates
Canada’s inflation rate reached an 18-year high2 at the end of 2021, driven by increased costs to consumer goods, including gasoline and food, and significant delays in the supply chain. The Bank of Canada is expected to begin increasing its overnight lending rate incrementally later this year, which would result in higher mortgage rates.
While rising interest rates slow house price appreciation, higher borrowing costs will be coming off historical lows and the increases may not be enough to offset the significant upward price pressure from Canada’s housing supply crisis.
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Fourth quarter highlights:
- National aggregate home price increased 17.1% year-over-year in final quarter of 2021
- 87% of the report’s 62 regions saw double-digit year-over-year aggregate price growth in Q4
- 61% of the report’s 62 markets saw a quarterly aggregate price increase of 3% or greater
- Kingston, Ontario, posted highest year-over-year aggregate and detached home price gains in Canada (38.1% and 44.3%, respectively)
- High demand outstripping low inventory at the start of 2022 signals further home price gains going into spring market