In the middle of March, the Canadian Real Estate Association (CREA) reported on the state of the domestic housing market. The price of a Canadian home rose 20% year over year to $816,720 in February 2022. It reported a surge in new listings that may carry momentum into the month of March. However, the CREA stated that results may be skewed due to high activity in expensive markets like Toronto and Vancouver. Today, I want to look at three reasons the Canada housing market will remain robust in the face of the promised rate-tightening cycle.
Canada’s housing supply remains low
Last month, Royal Bank warned that housing affordability will only grow worse in the months ahead. RBC Economics reported that nearly half of median pre-tax household income would be tied to mortgage payments and other housing costs in the fourth quarter of 2021. Listings have jumped in recent weeks, but low supply continues to be a strong factor in propping up real estate prices.
Back in January, the Canada Mortgage and Housing Corporation said that the annual pace of housing starts fell 22% in December 2021 compared to the previous month. There is a concerted effort to build more homes from federal and provincial governments. However, even the goals set by the Liberals in the previous election would not bring Canadian housing supply in line with the rest of the G7. Indeed, Canada has only 424 units per 1,000 people. That is the lowest average housing supply per capita in the G7. It will require years of a strong building pace to make up this deficit.
Immigration is set to soar to an all-time high
The Canadian government recently announced that Canada will aim to welcome 1.3 million new immigrants between the beginning of this year and the end of 2024. That will represent the largest and fastest pace of increase in the nation’s history. This torrid pace of immigration will contribute to high activity in the Canada housing market, especially in major metropolitan areas.
Rennie, a Vancouver-based real estate services company, projected that British Columbia will attract roughly 17% of Canada’s new immigrants in 2022. Metro Vancouver will receive nearly 80% of those newcomers. Consequently, Rennie predicts that this will put added pressure on a housing market that is already stretched by low supply.
Investors should pay attention to stocks like Atrium Mortgage (TSX: AI) in this climate. This Toronto-based company provides financing solutions to the real estate communities in Ontario, Alberta, and British Columbia. Its shares have climbed 1.1% in 2022 as of close on April 1. The stock is up 7.4% from the prior year.
Demand for Canada housing is still very strong
Record high immigration in 2022 and an undersupplied Canadian market will almost certainly lead to increased demand in this hot market. Demand is already feverish, but some experts and analysts expect policymakers could change that. Home buyers have long expected rising prices and continually low interest rates. A slew of rate hikes from the BoC may torpedo those preconceptions. However, demand remains very strong for the present.
This climate should drive investors to consider Bridgemarq Real Estate (TSX: BRE). The Toronto-based company provides various services to residential real estate brokers and REALTORS across Canada. Its shares have moved down marginally in the year-to-date period. Revenue rose to $50.2 million in 2021 — up from $40.3 million in the previous year. Best of all, this stock offers a monthly dividend of $0.113 per share. That represents a monster 8.3% yield.
