A LOOK BACK AT REAL ESTATE IN 2021 AND WHERE IT IS HEADING IN 2022
A MORTGAGE BROKERS PERSPECTIVE

I often joke that I consider myself a therapist. If you tried to contact me this year in June, July or August, I likely would have been as stressed out as the buyers I was helping. The market moved fast, and our team had to be available at all hours of the day. 2021 turned into the busiest year on record for real estate in the GTA and across the country. Rapid price appreciation, double digit growth in most markets, and even some markets doubling in value in a 12–16-month window. We try to manage expectations for our buyer’s, and the highs and lows that go along with the transaction.

So what happened? 

Prices: 
You don’t have to look far to see the prices changing rapidly. According to a recent CIBC article, more than 64,000 people left Toronto for other parts of Ontario since the pandemic started. This helped emerging markets increase 20%+ year over year. Remote work changed the way people worked and lived (from home) and commuted into the core (often no longer required).

From November 2020 to November 2021; price increases are included below.
Ontario +23.9%
Guelph +29.7%
Bancroft +47.0%
Niagara +35.1%
Cambridge +38.7%
Orangeville 37.3%
Brantford +40.8%
North Bay +40.8%
…I can keep going but you get the point.

Mortgage interest rates helped fuel the fire:
Fixed Rates were at historic lows due to the federal government’s bond buying program. Money was cheap, and banks were ripe with funds to lend. Fixed rates touched into the low 1%’s on 5 year terms, something we may never see again.

Variable rates; however, are still there as of today. Forecasts are for 2-4 Bank of Canada Prime Rate increases in 2022, but for most clients, that brings them up to a rate that is still in the mid 2%’s.

Inventory is still low, and demand is still high:
This is self-explanatory. There are more buyers than homes for sale.
Demand goes up, so do prices.

Early inheritance and wealth transfer:
You are probably wondering, how are people entering the market? Besides having an awesome mortgage team behind them, wealth is transferring from baby boomers to millennials, and it’s happening earlier and with larger sums of money than at any time in history. Parents are gifting funds (an average of $130,000 in Toronto per transaction) so their children can enter the market.

Baby boomer generations are staying in their detached housing for longer and gifting either the equity they have built or co-signing loans for the millennial demographic.

Mortgage financing qualification is approximately 5X gross income so a couple making $125,000 collectively still only qualifies for a mortgage of $625,000. In this market, it’s simply not enough. The bank of mom & dad is a powerful one.

So whats next? Is all of this sustainable?
Likely not, but for now, there is no signs of slowing down.

The immigration floodgate is still on hold, and there are 400,000 people anxiously waiting to enter the country. They are mostly going to settle in the GTA, Vancouver, Calgary, and Montreal.

Will rates going up stop this? I think the answer is a simple no. Having a rate of 2% vs 3% won’t change a buyers decision to move or enter the market. Keep in mind, mortgage policy requires all buyers to qualify at a rate on the application of 5.25%.

A few stories from the year that stick out in my mind from clients we dealt with personally; you make your own judgment on the state of the market. 

Example 1:  Freehold town home in Burlington (Guelph Line & Plains Rd)
Purchased Sept 2020 for $690,000.
Sold Dec 2021 for $944,000.
*No renovations or capital injection completed into the home.
-Gain of $244,000 ($16,266/month)

Example 2: Purchase of a cottage (not on the water) in Tiny, Ontario
Purchased June 5 2020 for $435,000
Appraised value November 2021 for $850,000
*No renovations or capital injection completed into the home.
-Gain of $415,000 ($23,055/month).

I don’t have a crystal ball, but I believe the market in 2022 will be as strong as the one in 2021 with the same underlying factors at play with the COVID pandemic.

A wise man (shout out Gord Ross) once told me the first rule in real estate is not location, location, location its hold, hold, hold. Purchasing freehold homes in a good location, you will not lose. 

If you need help entering the market and want a piece of the “gold rush”, we are here to help.

Matthew O’Neil
416 708 2562