The supply situation will have a major influence on these market dynamics, RBC says
Canada’s frothy markets will continue to see a surge in bidding wars this year amid perennial housing supply crunches, according to a Royal Bank of Canada forecast.
“Competition between buyers will remain fierce beyond the always-hot Toronto and Vancouver markets,” RBC said. “Inventories were at all-time lows in provincial housing markets accounting for 80% of activity in Canada at the end of last year – with only the Prairies, and Newfoundland Labrador seeing a milder scarcity of listings.”
The trend will be especially apparent in previously placid local markets.
“Many smaller markets saw bidding wars for the first time. We expect this to continue in the near term,” RBC said. “The supply side will continue to be crucial to Canada’s housing story. So far in the pandemic, supply has been dwarfed by supercharged demand. Inventories of homes for sale have plummeted to historical lows as a result, leaving few options for buyers.”
Read more: What will the mortgage market look like in 2022?
RBC estimated that the national housing market lacked 180,000 to 250,000 listings at the end of 2021.
“To reach a better balance, with exceptionally strong demand, active listings would need to at least triple,” RBC said. “Sellers ended 2021 in full control of virtually every local market. That’s bound to keep property values rising rapidly in the initial months of 2022.”
The likely epicentres of this market dynamism would be British Columbia, Ontario, Quebec, and Atlantic Canada, although RBC also predicted that “more moderate gains will set in once extreme tightness starts to unwind by mid-year.”
