Will The Run-Away Real Estate Market De-Rail In 2022?

Crazy, insanity, out-of-control are a few words to describe the Guelph real estate market in 2021. Will it continue, will it cool, or will it crash in 2022?

To answer that question, first, let’s look at what happened this year. We’ll also look at the current political and economical influences happening not only in Canada but worldwide that will impact our market in Guelph.

2021 A Year In Real Estate Like No Other.

Never in history have we experienced housing prices rise at such unprecedented amounts as we did in 2021, not only in Guelph but across Canada. 2021’s 4th quarter average price for Guelph detached homes were up 35% compared to the 4th quarter last year. The average price for the last 3 consecutive months has been over a million dollars for a detached house. If prices were to continue at this rate in five years the average sale price would be $4.5 million dollars. Is that going to happen? No.

The number of homes sold in 2021 was up 9.8% from last year but did not surpass 2015, which still holds the record highest number of sales in the last decade.

Why This Market Is Going To Continue, But Not For Long.

The market can not continue to rise at the current rate. Here’s why we think it’s going to level off and not crash. There are so many contributing factors but the three main ones are interest rates, economic stability and political policies.

Why Interest Rates Aren’t Going To SkyRocket in 2022.

Inflation is much higher than the upper target that historically triggers the Bank of Canada to raise interest rates, but they still haven’t. This is due to the higher unemployment but that has been dropping over the last several months, with November now at 6.0% we should see the BOC start raising rates early next year providing unemployment continues to drop.

However, because of the fragility of several large corporations and the government, we likely won’t see significant increases.

China’s largest developer Evergrande defaulted for the first time on December 6th. The troubled developer has a debt of over $300 billion dollars and according to some articles, it could even be as high as $500 billion

Many countries including the USA have loans with Evergrande, however, Canada doesn’t have any direct loans. Regardless, it is a warning to the ﬁnancial community as the number of Zombie companies are rapidly increasing both in the USA and Canada. A Zombie company is a mature large corporation that is unable to pay even the interest on its loans and doesn’t look like it is going to be able to do so in the near future. These companies are known as the walking dead. A rapid increase in interest rates could mean an end to these companies and drive unemployment rates up.

Ontario postponed its virtual aﬀordable housing summit that was supposed to happen Dec 16th until next year. The federal and provincial governments are talking about several new policies such as banning foreign ownership of housing for 2 years, taxing vacant homes, banning closed bidding wars, rent to own options, 1st-time buyer incentives and $4 billion for home creation by 2024-25. The big issue is increasing supply and although some of these measures may slightly reduce demand, not enough is being done to solve the root problem which is supply. These measures may help cool the market but without an increase in supply, we predict we will remain in a seller’s market.

We are not anticipating a major correction, there will deﬁnitely be a slowing of the real estate market at some point this year as interest rates increase and some policies are implemented, but we believe we will leave 2022 with more expensive houses than we entered. CREA recently published that they are anticipating prices increasing 7.6% next year with some provinces such as Ontario having higher appreciation.

How To Take Advantage Of This Market.

My cousin bought her home in April 2017, which at that time was a historical peak in the real estate market prior to it being corrected. In June 2017 she was thinking it was stupid and should have waited. Fast forward to 2021 it may end up being the best investment she makes in her life. If you look over the history of real estate in Canada in a 7-year period, real estate has always been a good investment. It would be risky to buy right now if you are going to have to get out of the market within a couple of years.

If you are going to buy and ﬂip, you should make sure it can be done quickly. Otherwise, yes, it is still a good time to buy real estate. If you have multiple properties and are looking at downsizing your portfolio it is an excellent time to sell. Also, if you are retiring to a secondary property, it is an excellent time to sell. If you are looking at upsizing your home it is a good time to do this, but buy and sell in the same market because the market could change rapidly.

With The Right Team, Anything Is Possible

At GoWylde Real Estate we are dedicated to helping you grow your wealth through Real Estate. We are passionate about providing you with the guidance to get you where you want to go. We will work around the clock, with our team of experts and a large spectrum of services to get you the best possible results.