Canadian home prices up 20.6% but market could be nearing turning point

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Millicent Wong
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Rental market proves robust housing supply dynamics help people find homes

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from RBC Mortgages

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High prices combined with higher interest rates could weigh on profits, says CREA

Publication date:

March 15, 2022 • 3 days ago • 2 minutes read • 14 comments Home sales rose 4.6 percent from the previous month, thanks to a 23.7 percent increase in new registrations. Home sales rose 4.6 percent from the previous month, thanks to a 23.7 percent increase in new registrations. Photo by National Post

Canada’s median home price rose more than 20 percent year-on-year to $816,720 in February, according to data from the Canadian Real Estate Association.

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Sales rose 4.6 percent from the January doldrums, thanks to a 23.7 percent increase in new registrations. Though strong, sales fell 8.2 percent short of the February 2021 record.

The Greater Toronto Area, British Columbia’s Fraser Valley and Calgary led the gains.

CREA had expected an onslaught of new listings, but chairman Cliff Stevenson said it was unclear whether this would last into the spring.

“New supply rose sharply in February, which is similar to what we’ve seen in 2020 and again in 2021,” Shaun Cathcart, senior economist at CREA, said in the press release. “The real question is, what’s next? Expect at least another month of stronger sales in the near term as most of these new offerings came out towards the end of the month so many of the associated sales will likely not happen until early March.”

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CREA’s benchmark non-seasonally adjusted home price index rose a record 29.2 percent year-on-year in February. However, the market could be at an inflection point for prices.

“Combined with higher interest rates and higher prices, we could be at a tipping point where price growth starts to slow and inventories finally start to recover after seven years of decline,” Cathcart said. “To rebalance this market over the long term, building more new homes across the spectrum remains key.”

  1. Homes under construction in British Columbia. Housing starts rose eight percent month-on-month in February.

    Canada housing starts up 8%, beating expectations

  2. A construction worker atop a condominium building under construction in downtown Montreal.

    The rental market proves that the dynamics of the housing supply help people to find a home

  3. The Financial Post's Gabriel Friedman covers rising interest rates and the Canadian housing market this week.

    What rising interest rates mean for housing and the economy

The need for more supply is shared by Re/Max executive vice president Elton Ash, who also said he expects the market to settle down this year.

“It’s definitely a lack of supply and inventory,” Ash told the Financial Post. “We’ve seen different levels of government trying to approach this from a fiscal perspective – in other words, to curb demand – which isn’t working. It’s really a supply problem. Housing starts need to increase, whether it’s single-family homes or condominium-style multi-family homes.”

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