Canada's Housing Boom is About to Get Even Crazier: Here's What to Expect

The Canadian housing market has been making headlines for quite some time now, with rising prices, shifting demand, and speculation running rampant. To gain greater insights on what's driving this market, and where it's headed, The Globe and Mail spoke with TD economist Rishi Sondhi.

"We've revised our forecast to reflect the improving sales and price picture," Mr. Sondhi said in a recent interview. As it stands, TD is predicting that the Canadian housing market will see sustained momentum over the next 12 months, driven by a combination of factors including low interest rates, pent-up demand, and demographic pressures.

On the sales side, TD is calling for a modest increase in transactions over the coming year. "We expect sales to rebound, but not to the same fevered pace we saw pre-pandemic," Mr. Sondhi explained. "Instead, we're looking at more of a gradual recovery, driven by buyers who've been waiting on the sidelines for the right moment to jump in."

As for prices, TD is predicting a similar story. "We've revised our price forecast to reflect the recent gains," Mr. Sondhi said. "But we still expect prices to moderate somewhat over the coming year, driven by a combination of increasing supply and stabilizing demand." Even with that moderation, however, prices are still expected to come in around 3-5% higher than they are today.

One of the key drivers of the Canadian housing market is the millennial demographic. As this group continues to grow and form households, they're increasingly turning to homeownership as a way to build wealth and secure their financial futures. "Millennials are a key demographic force driving the housing market right now," Mr. Sondhi said. "And as they continue to age and form households, we expect to see sustained demand for housing across the country."

Another factor driving the market is the low interest rate environment. With rates remaining at or near historic lows, buyers have more purchasing power than ever, and are able to finance bigger and more expensive homes. "Low interest rates are a key input into our forecast," Mr. Sondhi said. "And as long as they remain low, we expect to see continued demand for housing."

Overall, TD's revised forecast paints a picture of a Canadian housing market that's set to continue its upward trend, albeit at a more moderate pace. For buyers, that means continued competition for scarce listings, and a need to be prepared to act quickly when the right home comes along. For sellers, it means that the current sellers' market is likely to persist, with pricing power and negotiating leverage remaining firmly in their hands.