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  • Steve Huebl

2022 Housing and Interest Rate Forecasts


For the second straight year—and in the face of an ongoing pandemic—the Canadian real estate market has continued to defy gravity.


Projected figures for 2021 suggest home sales will end the year 21% higher than 2020 (to a total of 668,000 transactions), while home prices will end the year up 21.2% to an annual average of $687,500, according to the Canadian Real Estate Association.


Tight supply has been a recurring theme, with CREA noting the months of inventory measure has fallen below two months worth of supply just four times in history: in February and March of 2021, and again in October and November.


“While price growth is not expected to be as extreme in 2022, many of the conditions that supported it right up until the end of 2021 will still be there on New Year’s Day,” CREA noted in its housing forecast.


While home price growth is expected to moderate in 2022, low supply is still expected to keep upward pressure on prices for much of the year, according to various forecasts that we’ve summarized below.


We’ve also recapped the latest interest rate forecasts for 2022 from the bond market and from analysts at the Big 6 banks. While the exact timing and pace of any Bank of Canada moves is still up in the air, it’s clear that rate hikes are on the horizon.


Real Estate Market


CREA

  • 2022 home sales forecast: -8.6% (following a projected 21% increase in 2021)

  • 2022 home price forecast: +7.6% (following a projected 21.2% increase in 2021)

  • Commentary: “Along with an unprecedented supply crunch, there are quite a few other factors that will play important roles in Canadian housing markets in 2022. Ongoing strong demand from an unobservable but no doubt large number of households waiting for new listings to show up will be one tailwind,” CREA said. “There will also be headwinds, chief among them higher interest rates. While the Bank of Canada has set the stage for a tightening cycle of still indeterminate size to begin as early as April of next year, mortgage rates have already started to move higher, first this past spring, and again in the last few months.”

Interest Rate Forecasts


Below are the latest rate forecasts from the Big 6 banks. Averaging the forecasts, the Big 6 banks expect the overnight rate to rise about 1% by the end of 2022, meaning four quarter-point rate hikes by the Bank of Canada.


Looking ahead to the end of 2023, analysts from the big banks are calling for an additional three rate hikes, bringing the overnight rate to 1.75%.

Meanwhile, the bond market is maintaining its forecast for more aggressive rate tightening by the Bank of Canada.


As of Tuesday, it is still fully priced in for five quarter-point rate hikes by the end of 2022, which would bring the overnight target rate to 1.50%.

Steve Huebl Canadian Mortgage Trends

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