Canadian home prices rose for the first time in a year after the country’s central bank halted its interest rate hikes and sellers remained hesitant to list their properties.
(Bloomberg) — Canadian home prices rose for the first time in a year after the country’s central bank halted its interest rate hikes and sellers remained hesitant to list their properties.
The national benchmark price for a home climbed 0.2% to C$709,000 ($531,000) in March from February, according to data released Friday by the Canadian Real Estate Association. That’s the first increase after a year of month-over-month declines. Still, prices are down around 16% since their early 2022 peak.
“As the spring market heats up and it looks as though some buyers are coming off the sidelines, it’s important to remember that the intense market conditions of recent years have not gone anywhere, they’ve just been on pause,” CREA’s Chair Jill Oudil said in the statement.
Canadian home values have posted one of their fastest plunges on record as the Bank of Canada aggressively raised borrowing costs to curb inflation. But with the central bank declaring a pause in January and keeping rates unchanged at its last two meetings, the housing market is showing signs of stabilizing.
“Buyer psychology was probably helped by the Bank of Canada’s pause early in the month,” Rishi Sondhi, an economist at Toronto-Dominion Bank, said in a report to investors. “Our forecast assumes further sales gains are in the cards this year, although an important downside risk stems from looming regulatory changes that will make it harder to qualify for mortgage.”
Strong population growth, thanks to the government’s immigration policy, is running up against a limited supply of homes for sale. The number of properties hitting the market plunged 5.8% from February, according to the CREA data. The overall number of sales rose 1.4% month-over-month.
The sales to new listings ratio climbed to 63.5% — indicating a seller’s market — just a little over a year after one of the world’s hottest property booms started to unravel.
“A complete lack of new listings is the big story right now,” Bank of Montreal Senior Economist Robert Kavcic said in a report. “March typically sees a healthy increase in inventory, but this particular month was the weakest for any March in 20 years.”
With prices seemingly finding a floor, the rate-hike-driven “asset price adjustment appears largely complete,” he said. “The next leg of this real estate cycle will be dictated by how well the real economy holds up in the second half of the year.”
–With assistance from Erik Hertzberg.
(Updates with chart and additional economist reaction in final two paragraphs.)
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