Homeowners looking to sell can take advantage of the high prices while demand remains strong. There’s reason to believe house prices may either slow in growth or begin to fall within a few years. Although a catastrophic price crash is unlikely, current price growth is unsustainable and may lead to over-supply as investors and developers race to meet current high levels of demand.

Inflation Increasing

According to Statistics Canada, inflation is increasing at a higher rate YOY in 2021 than it has in around a decade. In April 2021, the annual inflation increase was measured at 3.4%, in part due to rapidly rising gas prices.

Increases in the inflation rate have led to price increases in real estate and in the market generally. To keep pace with inflation, investors are looking at real estate, especially CRE, as a way to reduce overall risk of loss.

Commercial real estate has often been used as part of an alternative asset portfolio to counteract inflation. It serves as an asset that holds its value despite inflation while also generating income, something that most money market investments cannot do.

Rising Interest Rates

Originally, the Bank of Canada expected slow economic growth for years as the economy recovered. Recently, their outlook has become more optimistic.

Economic growth was stronger in 2020 and early 2021 than previous projections suggested, leading the Bank of Canada to hint that interest rates could increase again as early as 2022.

If you have an adjustable rate mortgage, interest rate increases could make a house or commercial building less affordable. To preserve existing lower rates, lock in your interest rates with a fixed 5-year term. This is going to help you keep your debt-to-income ratio below 40%.

The average household in 2020 owed $1.77 for every $1 of disposable income brought in. If your household debt is anywhere close to this, consider putting on less debt and lower your total debt to income ratio below 40%.

Government Seeking Affordable Options

Budget 2021 has set aside billions for funding repairs, construction, and support for existing affordable housing projects, including more than 35,000 units.

This budget is set to stretch over 7 years, starting in 2021. It’s part of an ongoing initiative to increase affordable housing options post-covid. Funding is split between a number of different projects to assist people escaping violence, homeless individuals, low-income families, refugees, and others.

Many trends expected post-covid began before the pandemic and are accelerating under the unique market conditions. While other real estate market trends are likely to be identified later on, these are some of the most visible trends impacting property owners as Covid cases in Canada continue to decline.