forma condos.The trend of Canadian property market in 2022. The development of the global epidemic has entered a new stage. It is not clear whether this is the last darkness before dawn, but governments in Europe and the United States have shown consequences in printing money and handing out money over the past two years.Please Visit: forma condos to Get Your VVIP Registration Today!
More than ten days ago, Britain took the lead in raising interest rates, and the need for interest rate increases in the United States and Canada is also imminent. What impact will this have on the property market, which is closely related to bank interest rates? What is the general trend of the Canadian property market in 2022? Recently, Maclean’s, a well-known Canadian current affairs news magazine, interviewed some economists and analysts on this issue and made an outlook on the Canadian property market from five aspects.
To analyze the future trend, we should first be clear about the current situation of the property market. The popularity of the Canadian property market in the past two years is obvious to all. From April 2020 to October 2021, home sales in Canada exceeded the normal trend by about 246500 units. By contrast, the number of newly listed homes has increased, but it is only 85800 above the normal trend, well below the growth in home sales.
Stephen Punwasi, co-founder of Better Dwelling, a well-known Canadian real estate blog, believes that it is the Bank of Canada’s interest rate cuts and quantitative easing that have created “excessive demand” in the property market, allowing real estate investors to compete with buyers with rigid demand.
In addition, the Bank of Montreal (BMO) estimates that the annual sales of excess housing sales in Canada are about 150 billion yuan, which is equivalent to 6 per cent of Canada’s GDP. Note that this is not total sales, but the part that is out of trend spurred by low-interest loans. Moreover, this happens with almost no population growth.
The sharp rise in house prices in Canada since the epidemic has led many economists to believe that there is a real estate bubble in Canada on the grounds that house prices in Canada are much higher than in most other developed countries.
Hilliard R. MacBeth, a fund manager at investment firm MacBeth MacLeod Partners, says few people know that a real estate bubble will not put upward pressure on inflation and CPI when house prices soar.
As the chart above shows, house prices in Toronto (dotted line), Vancouver (orange line) and nationwide (black line) have risen 4.25 times to nearly five times since 2000, while household debt (red line) has also grown at an annual rate of more than 7%. However, housing cost expenditure (the green line), an important component of CPI, has increased only slightly, by about 1.6 times, and, for the most part, at an annual rate of less than 2 per cent. This is because the cost of housing is not included in Canada’s CPI.
This means that the skyrocketing house prices have no impact on the economic decisions of the federal government, and there is no feedback closed loop, which will make the economic development out of control and pose risks to the financial system. MacBeth believes that the level of household debt that accompanied the bubble is now a major risk.
However, as the Bank of Canada starts raising interest rates next year, house prices are likely to fall, but CPI, which measures housing costs, will rise because mortgage rates play an important role in CPI calculations.
Sales and house prices have skyrocketed. On the other hand, with the trend of urban densification, the number of detached houses listed for sale in Canada’s major metropolitan areas has fallen sharply in recent years.
In the greater Toronto area, the number of listings is down 52% from last year and 77% from 2017. In Vancouver, the situation is similar, with inventories down nearly 1/3 from last year and more than half since 2018.