What will British Columbians’ costs of living look like in 2022?

The COVID-19 pandemic has introduced a seemingly endless list of one in a generation and once in a lifetime challenges. First came the worst virus in more than a century, followed quickly by mass layoffs and business closures. Now we’re facing a global supply chain crisis and the largest spike in inflation rates in nearly 20 years.

While the year ahead will hopefully see a decline in infections and improvements in social wellbeing, it’s almost certain to be the most financially challenging of the pandemic.

Most experts expect prices will continue to rise throughout 2022. The Bank of Canada is expected to increase interest rates throughout the year to keep inflation in check. However, any relief at the register may be cold comfort to British Columbians who will have to navigate higher borrowing costs as well. Several price freezes which the B.C. government implemented at the outset of the pandemic which are also scheduled to expire in 2022 — which could mean higher rent, utility, and property tax prices in the year to come.

Read on to for a more detailed cost of living outlook for B.C. in 2022 and some tips to help cushion the impact on your own bottom line.

Food

Recent trends in inflation will continue to impact food costs for B.C. families. Canada’s Food Price Report predicts many of our grocery bills will increase between five and seven percent in 2022. For a typical family of four, this translates to an average annual food cost of $14,767 — an increase of more than $950 from 2021. 

You may also be interested (though perhaps not all too surprised) to learn the average cost of food is higher for children in the 14–18-year age group than for those younger or older. If you have teens, be prepared for food costs to be upwards of $3,900 per year higher than the national average for teen boys, and $3,300 per year higher for teen girls. 

Supply chain issues are another lingering issue to note which doesn’t show signs of slowing down. Difficulties getting things like meat and produce onto store shelves could result in higher-than-expected food costs — both in store as well as at restaurants. 

Fuel

One expert has predicted gasoline and diesel prices could rise by 25 percent by the end of February 2022. Dan McTeague, President of Canadians for Affordable Energy, also predicts there could be another 25 percent spike between the end of February and June.

If you consider the average price of gasoline in B.C. was $1.68/L between October 11, 2021 and January 17, 2022 this could translate to anywhere from $2.10 to $2.63 through the spring and early summer.

As we all know, fuel prices can be extremely volatile and are impacted by everything from large geo-political changes to more local holidays, weather events, and supply chain disruptions. Be sure to budget more generously for transportation costs in 2022 and consider alternatives such as carpooling and public transportation — especially if you commute regularly for work or family activities.

We also recommend using CAA’s free Driving Costs Calculator to estimate your annual fuel costs based on your vehicle and estimated annual mileage. This tool can be especially helpful if you’re considering buying a new or planning a long road trip in the coming year.

Heat

A higher cost of natural gas and gas delivery rates mean it’s going to cost more to heat your home in 2022, regardless how the remainder of the winter plays out weather-wise. Residential prices already went up in many regions as of January 1, 2022 — and may see further increases in the months ahead.

Those living in the Mainland and Vancouver Island regions have likely already seen an increase of approximately nine percent to their annual bills, or $100. For those living further north (i.e., Fort Nelson area), the rise is slightly more moderate at about $17 or 1.5 percent higher year over year.

Visit the FortisBC website to calculate the estimated increase in your heating bill.

Electricity

Finally, some (briefly) positive news: Electricity costs should decrease slightly (by about 1.4 percent or $23) over the year ahead for BC Hydro customers. This reprieve will be short lived, however, as BC Hydro has applied to the BC Utilities Commission to increase average bill by 1.1 percent over the next three years — and two and 2.7 percent respectively over the following two years.

While B.C. electricity rates are among some of the lowest in Canada, these still comprise a large portion of your cost of living. Some recommendations to maximize the current decline in costs and minimize the impacts of future increases include:

• Turn off lights in vacant rooms
• Replace burned out incandescent or compact fluorescent bulbs with LEDs
• Power off or unplug electronics when not in use
• Monitor daily sunrise / sunset times and adjust your monthly electricity budget accordingly

Mortgage and property taxes

At a mere 0.25 percent, the Bank of Canada’s overnight rate has been holding steady at record lows since the beginning of the pandemic. While low rates have been helpful for many Canadian mortgage holders and new entrants into the housing market, increases could push many households into dangerous financial territory — especially those already stretching their budgets to limit.

The Bank of Canada has been foreshadowing potentially several increases in 2022 to help combat rapidly rising inflation rates. Many experts anticipate rates will double to 0.5 percent throughout this year, and some anticipate they could go even higher if more modest increases don’t do enough to curb skyrocketing consumer costs. Two groups that should be the most apprehensive include those with variable rates and those needing to renew three-year fixed rates signed near the outset of the pandemic.

Coupled with low housing inventory, a continued rise in real estate prices could also make 2022 a challenging year for those wanting to get into home ownership. B.C. already has some of the highest real estate prices in the country, and the market doesn’t show any signs of cooling this year. Canada Mortgage and Housing Corporation offers a guide to help you determine if you are financially ready to own a home. You can use this tool to estimate the costs of home ownership based on your current financial situation.

Property taxes also going up

Residential property taxes are another, less discussed area of homeownership that will likely become more expensive in 2022. Comprised of municipal and school taxes, each district sets its own rate depending on budgetary needs and the cost of residential services (e.g., emergency services, waste collection, infrastructure, education programming and staffing costs, etc.).

Those living in Vancouver will see a property tax increase of 6.35 percent in 2022. Visit your local municipality’s website for rates in your area. You can also use the Property Tax Equation on the BC Assessment website to estimate your taxes.

Renting

While renting is often seen as a more cost-effective alternative to home ownership, it doesn’t appear the distinction will be so cut and dry for B.C. residents in 2022. In fact, the year ahead looks to pose further difficulties for renters in B.C. and the Territories — especially with the B.C. Government’s province-wide pandemic rent freeze set to expire. At an average monthly cost of $2,182 B.C. renters are already paying the highest rents in the country, but many should still expect landlords to maximize the 1.5 percent allowable annual increase under provincial law.

Making matters worse, those living in Whitehorse, Yellowknife, Iqaluit may find affordable housing is completely out of reach. The CMHC 2021 Northern Housing Report indicates a significant housing shortage — with only 13 percent of Whitehorse households saying they can afford rent in a mobile home, or a studio, one-bedroom, or two-bedroom apartment without financial assistance. 

Tips to absorb rising costs

It’s difficult to predict precisely what will happen both from a public health and economic standpoint in 2022. If the current spike in Omicron cases truly does represent COVID-19’s high-water mark as many hope, it’s possible the ongoing supply chain disruptions and out of control cost increases will stabilize. Though, it may be more prudent to err on the side of another variant and another round of economic impacts.

We recognize longstanding recommendations to simply cut back aren’t necessarily helpful, as many of the current cost increases are pressuring B.C. households’ ability to absorb higher basic living costs (i.e., groceries, utilities, housing, etc.). However, there are steps you can take to prepare for higher prices in the months ahead.

Reduce non-essential spending

The last thing many of us want after nearly two years of isolation and social distancing is to delay even more social and leisure activities. However, you will want to be intentional about how and where you choose to spend any disposable income in 2022.

Limit the amount you dine out or spend outside the home. For example, if you choose to go to the movies, skip the snack counter and enjoy a home-cooked meal beforehand. Consider putting off international travel until at least next year and continue to explore your own back yard. Also, resist the urge to shop for new clothes, furniture, or even home renovation supplies until prices stabilize.

Make budgeting a priority

Your monthly budget will be your best friend in 2022. You need to be able to make fast and wise financial decisions — and having a clear idea of how much you earn, how much you’re spending, and how you can absorb higher costs will help you do just that.

If you’re new to budgeting, MNP has a helpful spreadsheet to help you get started. Use the notes app on your phone to record purchases as they occur and consider setting up notifications on your online banking so you know when pre-authorized transactions occur and for how much. Set aside a few minutes every week to review your spending and update your budget. 

Look for opportunities to increase your income

There’s been a lot of chatter about the so-called Great Resignation currently taking place as the pandemic has forced many people to re-think their priorities and make significant life changes. With people quitting in record numbers, this may be the perfect opportunity to either ask your employer for a pay increase or look for a higher paying role.

Use this opportunity to update your resume and scour online job boards for opportunities in your field. Given the current climate, it’s not unreasonable to expect you might even get competing offers — but there are other potential financial benefits to consider:

• Clearer path to promotions and higher future earnings potential
• Performance incentives / annual bonuses
• More paid vacation and/or sick time
• Better health and wellness benefits
• Higher pension or RRSP matching
• Shorter commute or permanent remote work arrangement
• Childcare subsidy, access to fitness facilities, etc.

Build up your emergency savings

We often think of unexpected costs as a significant one-time event like an unexpected repair, job loss, or divorce. But struggling to keep up with rising prices certainly counts as a financial emergency. Don’t hesitate to pull from your savings if that’s what it takes to make ends meet

You can prepare for this eventuality by increasing your monthly savings contributions while prices are still comparatively low. Even if you need to start spending that money a year, six, or even three months from now, you’ll be grateful for the added insurance policy and time to adapt your budget to your new reality.

Address outstanding debt

The higher your costs become, the more difficult it will be to manage your debt. Take this opportunity to thoroughly assess your situation and devise a plan to get on top of your credit costs in 2022.

Do you have any room in your budget to increase your monthly payments? Have you considered a consolidation loan? Do you have a variable interest rate mortgage or line of credit? Speak with your lender about locking in a three or five-year fixed options while borrowing costs are still low.

Get a free assessment of your financial situation

If you’re already struggling with an unmanageable debt situation and worry the costs will be even more difficult to manage in the month ahead, reach out to MNP for a Free Confidential Consultation. Together, we’ll review your entire financial situation, discuss your challenges, and assess all the options available to achieve your financial goals in 2022.

If you qualify for Bankruptcy or a Consumer Proposal, both solutions can significantly reduce your monthly costs while providing a clear path to the financial fresh start you deserve. We can also determine whether you’d benefit from informal debt solutions such as credit counseling or debt consolidation — and uncover opportunities to streamline and simplify your monthly budget.

Assessments are free and completely confidential, and there’s no obligation to take part in any of the services MNP offers. But no matter what debt reduction strategy you choose, we guarantee you’ll walk away feeling more confident about your future and your ability to defeat your debt for good.