Canada’s hot housing streak cools as prices, sales fall in March

Article content

Canada’s real estate markets saw a significant slowdown in March, as a decline in sales pulled the national average price of a home down to $796,000.

Article content

While the average price was still up more than 11 per cent year-over-year, it declined two per cent from the February reading of $816,720, according to data from the Canadian Real Estate Association.

National home sales volumes were also down in March, falling by more than five per cent after a short-lived surge in February. The drop was led by declines in markets such as the Greater Toronto Area and Calgary. Newly listed properties also tumbled by about 5.5 per cent versus the prior month. The report noted that this decline puts activity back in line with where it stood since last fall.

Article content

“While the market remains historically very active, March definitely saw a slowdown compared to February in terms of both activity and price growth,” said CREA chair, Jill Oudil, in a release. “One month does not make a trend, so we’ll have to wait and see if this is the beginning of the long-awaited cooling-off of this market.”

Article content

CREA senior economist Shaun Cathcart noted that it was a positive sign to see some moderation in the housing markets in March since many were dreading another year of rampant price gains the country saw in 2021.

One month does not make a trend, so we’ll have to wait and see if this is the beginning of the long-awaited cooling-off of this market

Jill Oudil

“There were a number of measures announced in the federal budget to help aspiring homebuyers, the biggest being getting more housing built,” Cathcart said in a release. “That is the obvious long-term solution to this issue because we all need to live somewhere. In the near-term, the Bank of Canada will do the heavy lifting in the months ahead to slow things down on the price side. Unfortunately, that won’t really do anything to help affordability. Quite the opposite in fact.”

The Bank of Canada began raising rates this year, accelerating the process with an aggressive 50-basis point hike in April. Realtors are already seeing a shift in buyer attitudes as the costs of borrowing rise. John Pasalis, founder of Toronto-based real estate analytics firm Realosophy Realty Inc., told the Financial Post’s Larysa Harapyn in an April interview he was seeing an impact from the Bank of Canada’s moves.

Article content

“We’re seeing the impacts of higher interest rates on the ground, quite frankly, and we’ve been seeing it for the past month or so because five-year rates have been increasing well ahead of the Bank of Canada raising their rate,” Pasalis said. “Of course, that’s impacting people’s ability to take on debt, people’s (willingness) to borrow, and we’re basically seeing a pretty rapid decline in activity and demand in the housing market right now.”

Despite the signs of slowdown across some markets, Royal LePage is expecting home prices to grow 15 per cent over 2022 as strong buyer demand outpaces supply. The firm noted the national aggregate home price already soared just over 25 per cent year-over-year to $856,900 in the first quarter this year, which was the highest first quarter gain the company recorded.

Article content

“The first quarter of the year was so strong … that we are bumping up our 2022 outlook,” Royal LePage president Phil Soper said in a release. “And, home prices will continue to climb in the months ahead as a result of our relentless low supply-high demand imbalance.”

Robert Kavcic, senior economist at the Bank of Montreal, does not expect the effects of the rate hikes to take hold until summer.

“The reality is that market conditions will probably only show their true colours by late summer, after another 100 (basis points) of (Bank of Canada) tightening and when mortgage pre-approvals are expired,” Kavcic wrote in a Tuesday note to clients leading up to the CREA statistics.

• Email: [email protected] | Twitter: StephHughes95