2021 was another crazy year for housing prices in Canada. According to data from the Canadian Real Estate Association, prices are up by over 25% from the same place last year, and they’ll be at their highest point ever heading into 2022. So will the New Year bring any relief? Let’s look at a trend or three that might help us figure that out.

Trend # 1: Rising interest rates.

Depending on who you ask, people estimate that the Bank of Canada is going to raise its benchmark interest rates anywhere from 3-5 times in 2022. This matters because it’s what Variable mortgage rates and, so some degree, fixed mortgage rates are based around. In other words, we should see mortageg rates rise in 2022.

But so what?

Well, some folks are predicting that this means that a bunch of folks are going to rush to try and buy a house early in the year, before the cost of borrowing goes up too much.

Here’s the thing though.

In order for that to be possible, there needs to be homes on the market for sale. If nobody wants to sell in 2022, then we could see a Hunger Games type of environment, just like we saw this year. According to the Financial Post, total homes for sale are predicted to drop by anywhere from 10-15% next year. That means fewer choices for all these hungry buyers.

I’m no expert, but I can’t imagine everyone just saying “well screw it, guess I’ll just pay another 30% over what this place would have cost last year.” We’re going to continue to see folks wait on the sidelines until the insanity cools off.

When it does though, the same mortgage that you could have gotten for dirt cheap this year will cost a fair bit more in interest.

Trend #2: Immigration is set to return to historical levels.

I know, I know. Folks have been talking about this one for months. It was supposed to happen in 2021. But I really do think that 2022 is going to be a pivotal year for this pandemic. Either we’re going to use vaccines to get this thing under control, or we’re going to begin to treat it as just another sickness to be endured, like the cold and the flu. In reality, it’s probably going to be some combination of both.

What that means is that immigration probably will move upward next year, toward some semblance of normal. And thank goodness, because when inflation is normal, immigration is basically the only reason our economy grows.

Unfortunately, more people also means more demand for housing, and so regions that have already seen housing affordability be destroyed may see even more upward pressure next year. Expect cities like Vancouver, Markham and Brampton to see stronger price growth than average.

Trend #3: The Feds will step in to help first-time buyers.

The government has promised $1 billion in loans and incentives to help first-time buyers step onto the property ladder.

This includes things like rent-to-own incentives, which help long-term renters transition to homeowners over a period of time. It also includes the notion of a special TFSA just for first-time buyers under 40, which would allow them to save extra money in a tax-free environment, to be put toward the purchase of their first home. Lastly, the money would also go toward increasing the number of homes available for sale.

2021 was already a really strong year for that, and while we absolutely need more homes on the market, this won’t have a huge impact until the new wave of homes is completed… which won’t be for years.

Nevertheless, there are some good tools here for people looking to purchase their first home. So what does that mean for the market?

Well, here’s the tricky part.

If there are already too many buyers for the homes that are available, and you give people the tools for more folks to be able to buy… that seems like it’s just going to raise prices further. I mean sure, detached homes have increased by more than condos on average, and a first-time buyer probably isn’t looking at a detached home without help from mom and dad.

Still though, I do think this one is going to drive up prices in the condo and townhouse market, and may not have the impact the government is hoping it will.

Wrapping it Up

Look, I really hope I’m wrong about where prices go in 2022. It sucks seeing family members unable to buy because of where prices have gone. A correction would be more than welcome right now. I hope every trend in this post has a positive effect, not a negative one.

But until we address the insane wave of speculators and investors that are snapping up homes – and there’s a plan for that, in the form of an empty-home tax coming in 2022 – I don’t think we’re going to see the relief we’re looking for. Prices are expected to continue to rise next year, though thankfully not to the same degree that we saw in 2021.

All this to say: if you’ve been waiting to buy, and can still afford to do so, now might just be the time to do it.