Each year, Altus Group hosts the National State of the Market — a presentation that provides our industry with an overview of residential market activity and insight into the emerging trends that are expected to shape the next twelve months across Canada.
Over the past few years, the global pandemic has brought forth an acceleration of change not only within the real estate market, but across the globe. Now, the question becomes: which of those changes are here to stay and what changes are to come? Read on to discover the five emerging trends that will shape real estate in 2022 — all from this year’s National State of the Market which we attended so you didn’t have to.
1. The Volatile Economy Continues to Lead to Elevated Risks
Volatility continues to characterize the economy in Canada and in many of its markets. At the onset of the pandemic and throughout 2020, Gross Domestic Product (GDP) declined internationally. While Canada has been slowly recovering from this decline, large parts of the economy are still operating well below capacity. As soon as that improves, Canada will begin to see the pace of its economic growth normalize. But why is this important to real estate? The answer to that question is because the economy’s volatility influences our decision making. Volatility has been raised throughout this period as a result of the waves of the pandemic and the policy responses to it. Over the course of 2021 and into the rest of 2022, the volatile economy has and will continue to raise elevated risks which are important to keep in mind as purchasing decisions are made.
2. Investment Activity Will Continue to be Strong in 2022
The pandemic put a pause on real estate in 2020, pushing a lot of purchasing decisions to 2021. As a result, overall investment activity has increased by over 45% compared to 2019. The transactions that took place in 2021 totaled $16.5 billion, compared to $9.2 billion in 2019. Throughout the course of 2022, and as the economy recovers from COVID-19, investment activity will continue to be strong.
3. Single-Family Demand Remains Strong, but Supply is Constrained
In 2021, sales in the single-family housing sector were less than expected but that isn’t due to a lack of demand. In fact, experts reveal that the demand factors were and continue to be strong. While Generation Z has fuelled apartment demand, millennials have moved into their single-family years. Over the course of the pandemic, the demand patterns of those in this age bracket shifted away from apartments and city cores, and towards single-family homes in broader areas.
Although, the industry isn’t seeing sales come in like they have in previous years. In 2021 for example, approximately 13,700 single-family sales were recorded in Toronto — down 20% from 2020. Underlying demographics reveal that we need about 20,000 units in the GTA so selling 13,700 falls short of that demand. What’s to blame for this decrease in sales, you ask? A lot of it has to do with supply and bringing new projects forward. In December of 2021, only 770 lots remained in single-family inventory across the GTA. A year ago, that number was over 2,300 and two years ago, it was over 5,000 — showing a clear compression in supply. So while single-family demand remains strong, supply is limited, creating waves in major markets where price pressures are emerging as a result.
4. Pandemic Effects on Housing Demand Shifting Preferences
As mentioned earlier, the pandemic has shifted buyers’ preferences. More and more, we are seeing purchasers favour broader areas — such as cities that are 1 – 2 hours outside of Toronto — over city centres as a result of more affordable housing, larger homes and remote working capabilities. In 2019 and 2020, data indicates that a growing number of people were moving out of the GTA market, and into the areas of Kitchener-Waterloo and Hamilton — a trend that is expected to continue playing out over 2022 and into 2023.
5. High-Rise Projects Provide Density and Redevelopment Opportunities, Appealing to Investors
It’s been a record year for condominium sales. In 2021, apartment sales in Toronto ended off the year at approximately 33,000 units — just below the all-time high in 2017. Over the course of the year, larger projects have been developed with a greater variety of units, fuelling purchases from investors. Despite the fact that we are seeing more of a shift of demand into single-family housing, the supply and demand in the new condominium sector is continuing to keep a fairly buoyant price pressure, with Toronto’s average condo apartment priced just above the $1 million mark. Throughout 2022, we can expect to see high-rise projects continuing to provide density and development opportunities, particularly in city cores and transit-oriented communities — driving further investments from those in the real estate market.
For more homebuyer or real estate resources, explore the stories on our blog.
All information is courtesy of Altus Group’s National State of the Market 2022.