It is on a tight balancing act
The Canadian housing market can expect current market dynamics to feed into its sustained growth and robustness well into 2022, according to an independent analyst.
A major trend that will likely continue this year is supply lagging considerably behind soaring demand, analyst Ambrose O’Callaghan said in a recent contribution to The Motley Fool.
“Housing sales in Canada had already surpassed the 2020 total by the end of November,” O’Callaghan said.
Fuelling further market strength is immigration, which had a record high of 401,000 newcomers in 2021. O’Callaghan said that this record is likely to be broken again this year, taking the gradual reopenings of borders into account.
“The last time Canada surpassed the 400,000 annual immigration levels was all the way back in 1913,” O’Callaghan said. “The troubling lack of supply in the Canadian housing market means that these numbers will continue to contribute to soaring demand.”
Read more: COVID-19 intensified ongoing housing market trends – RBC
However, the Bank of Canada’s stated commitment to begin hiking its benchmark rates by mid-2022 will be at cross purposes with the likely policy response to the resurgence of coronavirus infections, O’Callaghan said.
“The Omicron variant and coming restrictions may threaten those tightening plans,” O’Callaghan said. “Any rate hikes will be modest and gradual in this dangerous environment.”
