Posthaste: Home sales set for the second ‘most remarkable’ year in Canadian real estate history
Pamela Heaven
The Vancouver Sun
RBC forecasts ‘super strong’ sales in first half of year
RBC forecasts 579,600 existing homes will be sold this year. Photo by National Post
2021 by all accounts was a record-breaking year for Canadian real estate — a blockbuster for sales, prices and low inventories.
Such a pace is unsustainable, most agree, but how much of a comedown are we in for?
“Canada’s housing market isn’t about to buckle,” writes RBC senior economist Robert Hogue in a recent report.
The market will cool from the torrid heights of ’21, says Hogue — a view shared by most economists and industry experts, but a continuing shortage of supply and unmet demand are expected to drive “tremendous activity” this year.
RBC forecasts 579,600 existing homes will be sold this year. That’s down 13.1% from the record 667,000 transitions in 2021, but it’s still the second highest number in history, he said.
Most of the slowing will happen in the second half of the year, says RBC, with the outlook for prices in the first half to remain “super strong.”
Canada’s perennial problem of short supply is the biggest driver.
A report by Bank of Nova Scotia chief economist Jean-François Perrault says that Canada has the lowest average housing supply per capita among the G7. Within Canada, the housing shortage is most severe in Ontario, Alberta and Manitoba.
RBC estimates that the Canadian market was short 180,000 to 250,000 listings at the end of 2021. To achieve a better balance between supply and strong demand, active listings would need to triple, wrote Hogue.
In the meantime, sellers maintain a tight grip on just about every market in Canada, with many smaller centres seeing bidding wars for the first time.
Inventories were at record lows for most provincial markets at the end of 2021 and RBC expects competition between buyers to remain “fierce” even beyond Toronto and Vancouver.
Demographics should keep demand strong, says Hogue. Millennials, now in their mid-20s to early 40s, are swelling the ranks of Canadians in their prime years for buying a home. RBC says there were 10.5 million people aged 25 to 44 in Canada in 2021, an increase of 8.3% in the past five years. “If historical ownership patterns hold, millennials will remain a major force in the housing market in 2022 and beyond,” wrote Hogue.
Immigration is also set to increase with the government target rising to 411,000 this year. Immigration typically hits the rental market first, but RBC also believes some skilled workers coming to fill labour gaps will be ready to buy as soon as they arrive.
The big event that will tap the brakes on the housing market is Bank of Canada rate hikes. RBC expects six hikes totalling 150 basis points over about 18 months, causing both variable and fixed mortgage rates to rise “materially” — even to the point of pushing up the mortgage qualifying rate.
This alone should dampen demand, especially in expensive markets like Toronto and Vancouver.
At the same time more supply is expected to come on the market, said RBC. Housing starts climbed last year to levels not seen since the mid-1970s. All going well, that could boost completions to almost 250,000 units in 2022, up from the average of 190,000 units over the past five years.
That increase along with slightly slower demand should “noticeably” ease the imbalance, said Hogue.
Yet, RBC doesn’t think the housing market will see abrupt changes. “These will be the first steps on a long road to normalization. We do expect 2022 will be a remarkable year by almost any standard … unless you compare it to 2021,” wrote Hogue.
The global outlook for real estate returns also looks strong. Oxford Economics forecasts that total returns for direct real estate and REITs will average 6.5% to 7% a year over the next five years, significantly outperforming bonds and equities that it projects will return 0.7% and 2.5% a year, respectively.
Was this newsletter forwarded to you? Sign up here to get it delivered to your inbox.
OTTAWA UNDER SIEGE Big rigs and their supporters descend on Parliament Hill on Saturday. Thousands of truckers from across the country and protesters opposed to COVID-19 vaccine mandates and restrictions descended on the capital over the weekend . Much of downtown Ottawa was snarled by parked vehicles and crowds of protesters. The protest started against the federal government’s vaccine mandate for cross border truckers, but expanded into a larger movement against broader public health measures to limit the spread of the virus. Transport Minister Omar Alghabra told the CBC the federal government stands by its vaccination rule for cross-border truckers.
- International Energy Agency releases quarterly report on global natural gas markets
- Omar Alghabra, minister of transport; Francois-Philippe Champagne, minister of innovation, science and industry; Marie-Claude Bibeau, minister of agriculture and agri-food; and Mary Ng, minister of international trade, export promotion, small business and economic development, will hold a news conference following a national summit to strengthen Canada’s supply chain
- The Association for Mineral Exploration Roundup 2022 runs from Jan. 31 through Feb. 3 in-person and online in Vancouver. Opening day includes virtual comments from Energy Minister Bruce Ralston
- Sean Fraser, minister of immigration, refugees and citizenship, will make an announcement on improving and modernizing the immigration system
- Parliamentary Budget Officer releases costing note “Underused Housing Tax Act”
- Ontario eases COVID-19 restrictions. Indoor dining, gyms, retailers, shopping malls, and cinemas can reopen at 50 per cent capacity
- Today’s Data: Canadian industrial product and raw materials price indice
FP Dealmakers 2021: Equities steal the show in bonanza year for dealmaking
- FP Dealmakers: How a ‘rocket fuel’ tech sector drove the year of the IPO to new heights
- Stocks rebound but head for worst January since 2016
- Time to defuse the bomb that will explode when boomers turn 85
- What rate hikes mean for the housing market
- Goldman’s top strategist sees risk of further stock market pullback
- Shell to begin trading under simpler, single-line share structure
2021 turned out to be a year for dealmaking, Financial Post data has revealed. Low interest rates and record-breaking stock markets fuelled 17% more deals than in 2020. The dollar value of $517.3 billion was slightly lower than the year before as governments eased off from the early days of the pandemic, but it was well above 2019, writes the Financial Post’s Barbara Shecter. Corporate markets flourished, racking up 32% more corporate debt and equity deals than in 2020, with a total value of $332.73 billion, up nearly 17%. For more on the blockbuster year for deals and the top dealmakers, read on.
It’s that time of year again when the task of doing your taxes begins to nag at the back of your brain. It’s tempting to ignore it until the the April 30 deadline is upon us, but as our content partner StackCommerce points out, that just makes the task that much more stressful. The trick is getting out ahead of it and doing them early.
StackCommerce can help, whether you are an individual, family or business. The 2022 Complete Tax Preparation Bundle features over 600 lessons on how to get ahead of your taxes. From breakdowns on how to create financial reports in Microsoft Excel to lessons on how to enter tax data for an S corporation, the answers to your filing questions can be found here.
Today’s Posthaste was written by (@pamheaven), with files from The Canadian Press, Thomson Reuters and Bloomberg.
Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@postmedia.com , or hit reply to send us a note.
Listen to Down to Business for in-depth discussions and insights into the latest in Canadian business, available wherever you get your podcasts . Check out the latest episode below:
Sign up for five amazing FP newsletters
Sign up now for FP’s lineup of free, in-depth newsletters: Energy, Economy, Finance, Work and Investor
© 2022 Vancouver Sun