The housing market has had a lot to contend with in the past few years, from the COVID-19 pandemic to inflation, property tax increases, rising costs of construction material, and the shortage of housing inventory. Then there’s the factor of affordability.
Potential homebuyers have hoped for relief in 2022, but according to current listings in Brampton, house prices have gone wild in the last two years. In just 24 months, there has been an average increase of $50,000.
What Is Happening to House Prices?
Most Canadians are now struggling to enter the housing market as costs rise. Due to inflation and higher borrowing costs, housing affordability gets even more challenging for new potential buyers.
According to Mortgage Professionals Canada (MPC), 29% of respondents felt it was an excellent time to buy a new home in their community. This translates as the lowest figure in the 12 years of the survey. In addition, the Canadian Real Estate Association (CREA) statistics show that average home prices have risen 20.6% year over year in February. Inflation gets even higher, being at a more than 30-year high.
Why Are House Prices Rising So Much?
There is an overall pressure on consumers due to current inflation levels, not only for those looking to buy a house. People now feel inflation at the grocery stores and gas pumps.
Since the pandemic, house prices have increased constantly, primarily due to:
- Low mortgage rates
- The desire for more rural living
- A small supply of houses
- Pent up demand
- Rising interest rates
- Low inventory
While the Bank of Canada has started to increase its key interest rate target to handle inflation and calm the housing market a little, the cost of borrowing has risen. Moreover, it is believed by 74% of real estate experts that the housing market will get back to the pre-pandemic inventory levels by 2024.
Statistics on the Canadian Housing Market
Statistics show that half of Canadian homeowners could not buy a house today, as the average price for a home is around $800,000. The prices are now about 28% higher than a year before. Thus, compared to the average annual income, most homeowners wouldn’t be able to afford a house today. To qualify for a mortgage, buyers may need to raise their revenue by 88%. It is true that more than half of Canada already owns a house, but that is due to older demographics.
Will Home Prices Drop in 2022?
Whether you are a seller or a buyer, you can be either very happy or very disappointed, as home prices are expected to rise this year. The housing market will continue to stay strong in 2022 due to the housing bubble and inflation. In addition, rising inflation is putting renters in serious difficulty as they can no longer save as much money for a down payment.
On the other hand, rental rates have been skyrocketing. As of today, the average Canadian rent prices are 10.8% higher now than last year. This means renters have to pay around $1,670 per month for a 1-bedroom condo.
Rental prices have had price hikes due to:
- People moving to cities
- Lack of housing supply
- A rebound of the economy
- An increase in people looking to live on their own (or so-called household formation)
The rising housing prices have put buyers on hold as they fear the escalating down payments and monthly mortgage costs. Unforeseen factors can change the course of the housing industry at any time.
There is no absolute best strategy, such as buying now or waiting. It would be best if you ensure that before purchasing a new home, you can afford it and still have some room to save money for rainy days. For example, if you are buying a house with a co-signer and they lose their job, you must ensure you can pay the mortgage with your sole income.
It would be best to consider living in the house for at least five years so you can cover the closing costs. By doing so, you won’t lose money when you decide to sell.