Expect a New Surge in Canadian Home Prices

Canadian house prices are expected to increase again. We are seeing both first time home buyers and investors scrambling to buy before the interest rates increase. The Bank of Canada has issued a warning that there is a high risk of a sudden price drop but people are ignoring this and looking to buy now. 

We can see renewed investor activity and market frothiness in a number of cities. So homeowners are considering if it is a good time to buy or not. These conditions are known to have the ability to expose the market to a higher chance of correction. 

The Bank of Canada in October 2021 signaled that the overnight rate was at an all time low of 0.25%. They also predict that this could begin rising in the middle quarters of 2022. Analysts note that another rush to buy may have already started. 

It is common for people to jump into the market when interest rates start rising again. This includes investors who want to make most of their money and of the market. This is why an acceleration is expected within the next couple months. 

A Little History – Canadian Housing Market in 2021

In March of 2021, Canadian house prices increased 31.6% year over year. We hit a record high before prices softened a bit in the summer of 2021. We are now seeing a price just below this peak in October 2021. 

The rating agencies are taking notice with estimates of Toronto’s housing market being overvalued at 32% and Vancouver’s housing market being overvalued at 23%. Toronto is Canada’s largest city and the average home price there hit 1.2 million CAD in October. This is an increase of 19.3% from the previous year. This, while the average cost of a detached home is CAD $1.5 million. 

While the Prime Minister promises to act on the market, many are criticizing him about the 77% increase nationwide since he came into office in 2015. 

Mortgage brokers everywhere are seeing an increase in clients that are motivated to buy, as they fear the prices will only keep going up. While fear is never a good motivator, this is the current reality of the Canadian housing market.