Real estate brokerage Royal LePage says that the expected rise in interest rates in 2022 “may not be enough to offset the significant upward price pressure” on homes, especially in the Greater Toronto Area where it expects the cost of the average property to go up by double-digits once again.

The brokerage said that the aggregate price of a home in the Greater Toronto Area increased by 17.3 per cent in 2021 to $1,119,800 as demand continued to outpace supply.

It is forecasting that in 2022 prices in the GTA will rise by another 11 per cent, with the aggregate home price reaching $1,243,000 by the fourth quarter.

The forecasted price growth comes despite market expectations that the Bank of Canada could raise interest rates up to five times in 2022, significantly increasing the cost of borrowing.

“It isn't sustainable. The good news, if you could call it that, is we see all prices rising at about half the rate they did in 2021 in the months ahead so while home prices continue to be more expensive the rate at which they're getting more expensive is falling,” Royal LePage President and CEO Phil Soper told CP24 on Friday morning. “We will find things return to normal appreciation levels sometime in the future, my guess is by 2023 we will be back into single-digit increases, which is what we have come to expect in the city and across the country over the decades.”

The Bank of Canada’s overnight lending rate has been at its effective lower bound of 0.25 since early on in the COVID-19 pandemic but with inflation surging and employment numbers back to their pre-pandemic norms the central bank is expected to begin a cycle of rate hikes in the coming months.

Soper said that when that happens it will effectively make homes more expensive and “some people will get priced out of the market.”

But he said that it likely won’t be enough to tame rising housing prices, given the lack of supply.

“We’ve been building to this lack of supply for years unfortunately and it really came to a head during the pandemic when there was such hyper focus on our homes,” he said. “People were saving money. They were not travelling, they weren’t going out to restaurants and they redirected that money, a lot of it, into their living conditions.”

Royal LePage says that in 2021 the median price of a detached home in the Greater Toronto Area increased 22.4 per cent to $1,421,200 while the median price of a condominium increased 14.8 per cent to $665,400.

Soper, however, said that price growth in condos could outpace detached homes in 2022 due to the “growing gap” in prices, at least in the GTA.