It’s 2022 – time for Canadian Real Estate Investment Trends and Market Opportunities in 2022.
Farewell to 2021. Even if 2022 isn’t “back to normal” yet, we can hope that it will at least be better than 2021.
Admittedly COVID-19 and its successor Omicron have created devastation in tandem with global economic trends, which have rippled into the Canadian real estate market industry.
This report summarizes common trends in the short-term future of Canadian real estate. The second section of the report addresses Canadian Real Estate Markets in 2022. These trends were sourced from; PWC’s Emerging Trends in Real Estate 2022, and Canadian real estate markets to watch in 2022.
Virtual Shift – Work/Life Balance
Because of the pandemic, workplaces were forced to utilize technology, allowing employees to work from home. When Covid restraints lifted, many work cultures shifted, allowing people to choose their work location to virtual, in-person, or hybrid. This virtual shift provided more time with family and self, which led to either renovating or retrofitting current homes to accommodate remote work or moving to newer, bigger locations in more affordable rural centers.
In 2021 home became the center of personal and professional lives and functioned as a workplace, gym, school, shopping center, and entertainment center. Retailers pivoted to offer online sales, home delivery, and curbside pickup to stay afloat. The public embraced online shopping, which created a need for industrial real estate warehouses. Unnecessary travel was greatly reduced. Takeout, online training, and virtual meetings became an integrated part of our daily routines.
“The RE/MAX 2021 Renovation Investment Report found that more than half of Canadians renovated their home last year for personal or “non-ROI” purposes, with three in 10 (29%) choosing to renovate for non-essential “lifestyle” reasons, such as recreation-inspired projects.”
Although rental rates increased in 2021, rentals followed a similar trend realizing a decline in urban centers and an upswing in outlying areas.
Canadian Real Estate Market Trends
BoC Keeping the Real Estate Market Afloat
For the financially secure, 2021 was an excellent opportunity to upsize or buy more real estate because of the continued low-interest rates. The Bank of Canada poured billions of dollars into the real estate sector through the purchase of Canada mortgage bonds to keep it afloat. On the flip side, banks made it very difficult for new homeowners to qualify for a mortgage. This outgrowth has led to finding alternate, or creative methods for homeownership, as seen in the Vancouver real estate market.
The Rental Market
In the rental market, even with the government-enforced laws prohibiting landlords from evicting tenants for nonpayment of rent, most tenants paid their rent in full, and vacancies were low. Housing prices and rents increased following the pandemic and continue to rise faster than wages in 2022.
Government support reached an unprecedented $6 trillion in supplemental unemployment payments and stimulus checks. This contributed significantly to real estate stability. Property markets stayed pretty much the same as pre-pandemic.
With the increase of Work from Home (WFH) options, fewer companies utilized office space. Many chose not to lease expensive space or renew leases in costly urban areas making many office buildings obsolete. With over 1/3rd of workers saying they would rather quit than return to work at an office; businesses must rethink their workspace environment.
Floods, fires, droughts, and hurricanes; the annual number of natural disasters has doubled from 1980 – 2016. Government, consumers, and real estate investors must create sustainable environmental, social, and governance (ESG) measures with operational or investment decisions contributing to a cumulative positive impact on climate change.
Immigration Still Key in 2022
Immigration is key to economic development and urban population growth. Immigration plays a significant role in benefiting home sales, student, and multi-family rentals. In 2022, Canada hopes to welcome 411,000 new immigrants. When the travel bans lift, Canada is poised for a surge in real estate sales and rentals.
Home sales create spin-off purchases that generate approximately $80,000 in sales and services funneled back into the economy. Real estate can be the economic engine that sparks positive economic growth.
Niche Market Investing
Niche markets in Canadian real estate investing such as student housing, senior housing, medical offices, health science offices, warehouses for data, and cold storage are becoming attractive alternatives for real estate investors since they depend on demographics rather than the economy.
During COVD, employers discovered they didn’t need office space to keep productivity high. Employees appreciated spending more time at home and less time in transit.
Because working from home could be long-term or even permanent, people moved to suburbs that offer home offices, back yards, walking trails, and access to parks.
New technologies allow realtors and clients to attend interactive virtual showings and live-streamed open houses. Lower interest rates permit people with the means to buy bigger homes at considerably lower prices.
Oversupply of condos absorbed
in 2021, the pandemic realized an oversupply of condos in the Candian real estate market. Since the collapse of Air BnB, people who didn’t have the means to carry the property/mortgage were forced to put their condominiums on the market.
2022 paints a different story, according to the RE/MAX Canada 2021 Condominium Report; “staggering gains in detached housing value sent condominium sales soaring throughout the first eight months of 2021 in major Canadian centers. The strongest gains in sales were made in the West, where Greater Vancouver and Calgary saw condominium sales rise 87 and 83 percent respectively between January 1 and August 31 of 2021, compared to the same period in 2020, which experienced a notable downturn in condo sales.”
Additionally, COVID has created a demand in the following areas of the Canadian real estate market:
Research for the Corona vaccine and aging populations have created a demand for industrial campus-style offices where the life science industry can conduct research.
Ironically, the use of medical facilities declined because of deferred and canceled elective procedures during the pandemic. Over-the-phone consultations (telemedicine) increased dramatically. Emerging Trends in Real Estate 2022 predicts an increase in neighbourhood medical facilities as people prefer the convenience of appointments closer to home.
Personal Storage Space
Living and working in the same space creates constraints alleviated with self-storage. Self-storage continues to be a niche investment vehicle for many investors in the Canadian real estate market.
Distribution Real Estate
The flood of e-commerce, food delivery, medical supplies, and home improvement created a demand for warehousing, fulfillment, and logistics real estate.
TV and Film Production Studios
Given the popularity of digital streaming during the pandemic, real estate that offers studio space seems like a good prospect.
People love convenience, and the pandemic has made us hyper-aware of trending conveniences that save time and money. Here are three:
Ø 18 -Hour Cities
Real estate investors and economists use this term to describe medium-sized cities with higher-than-average population growth, lower cost of living, and doing business, with all the conveniences of a big city. Areas like London, Ontario, Ottawa, and Halifax fit this 18-hour city profile. 18-hour cities will continue to be a popular trend in 2022.
Ø 15-Minute Cities
A 15-minute city is a term that means you can walk or cycle to get anything you need for day-to-day life within 15 minutes of your home. This trend will never go out of fashion.
Ø Property Technology (Prop Tech)
Initially, proptech centered around property management software and technologies that automated or filtered energy to support efficiency, a healthy environment, and reduce costs. However, proptech is continuing to evolve as real estate needs emerge.
Video conferencing, interactive virtual tours for renting and selling properties, and remote monitoring of buildings, are being utilized to cut back on costs for essential communication services.
Data sensors used by construction companies fine-tune building and design processes, while data analytics provide insights for exiting properties. Data analytics identify the best locations for potential investment opportunities.
Smart homes and buildings create the ultimate in personalized conveniences and expose cybersecurity vulnerabilities.
Virtual reality with drones is commonplace for real estate showings, as are virtual applications/leases and payments. Real estate can be purchased with Bitcoin (BTC) in the UAE and the USA. Canada is beginning to follow the BTC wave.
New technology creates a demand for upskilling the workforce to maximize efficiency while minimizing security threats—new technology fuels education and employment.
Finally, what are the Canadian real estate trend predictions for major cities in 2022?Real Estate Markets Across Canada
Real Estate Markets Across Canada
Markets to Watch from PWC’s Emerging Trends in Real Estate® 2022 report outlines the following:
- Top market third year in a row
- Predicted rebound of 3.7% GDP in 2022
- Real estate prices strong
- Strong economy & population growth due to immigration and student population
- 38% of single-family homes were “non-market” transactions (intergenerational transfer or other)
- Office and Industrial sectors remain strong
- GDP outpacing the national average by 2.4% per year, at 20% of national GDP
- Affordability (average selling price up 18.3%) and availability of housing (1%) in 2021 – significant concern
- Industrial markets, specifically warehousing and fulfillment spaces very strong, movement toward innovative solutions such as vertical or multilevel space
- Predicted GDP forecasted at 3.5% rebound in 2022
- Single-family homes selling at above listed prices
- Office market vacancy rate 7.7%
- Industrial market demand from e-commerce and distribution companies strong
- Predicted GDP growth of 3.7% in 2022
- Population growing, low rental vacancy rates, and housing inventories
- Office market vacancy rate 26.7%
- Industrial market strong, vacancy rate of 3.1% in second quarter of 2021
- Predicted GDP forecasted at 4.2% growth in 2022
- Demand for single-detached, semi-detached homes, townhouses, and downtown condos
- Need for rental units and affordable housing in the suburbs
- Office market reconfiguring rather than reducing space for hybrid work environments
- Industrial market strong specifically in life sciences and biotechnology – low vacancy rates, below 2%
- Rental market set for 10,000 new units in 2022
- Predicted GDP increase of 3.3% in 2022
- Strong resale market and dwindling supply of new homes
- Office vacancy continues to rise
- Stable industrial market at 3.5% vacancy rate
- High demand for single-detached housing which will fall in 2022 due to new construction
- Large number of rental units under construction creating a balance of supply and demand
- Strong industrial market with new developments including a large data processing center for Levis
- Tramway project – has the potential to transform the city and open new development opportunities
- The city will see the highest growth of 13 major census metropolitan areas this spring
- Rising demand for housing
- Office vacancy rates decreased to 8.5% in the second quarter of 2021
- Stable housing market due to low borrowing costs and trend of reverse urbanization
- Industrial real estate strong – Edmonton evolving as a warehousing and distribution center
- GDP rose 4.6% in 2021
- High demand for single-detached housing
- Office market vacancy rate rose to 11.8% in the second quarter of 2021
- Strong industrial market with a vacancy rate of 3.4% in the second quarter of 2021, demand for warehousing and transportation
- GDP predicted to expand by 2.9% in 2022
- Demand for affordable single-family housing
- Office vacancy rate 26.7%
- ESG becoming an increasingly important factor
- Industrial market strong – high demand for distribution space
2021 was a year of surviving and thriving despite Coronavirus 19. It created trends, opportunities, and challenges in Canadian real estate, technology, and every other area of our personal lives. The pandemic continues to disrupt and reshape our work and home lives in 2022 and beyond.
How has 2021 treated you in your business of landlording? Where do you want to go with your property rental business in 2022? I’d love to hear how [email protected].
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