Canadian home prices posted a record surge in February as buyers piled into the market ahead of what’s anticipated to be an aggressive set of interest rate increases by the nation’s central bank.
Benchmark home prices rose a record 3.5 per cent in February, with transactions jumping 4.6 per cent during the month, according to data released Tuesday from the Canadian Real Estate Association. While new listings also increased sharply, the surge in sales left inventory levels at record lows with just 1.6 months worth of supply in the market, the data show.
The Bank of Canada raised its benchmark interest rate for the first time in more than two years earlier this month, a long telegraphed move that was accompanied by warnings of more hikes amid surging inflation.
Record low interest rates and demand for larger living spaces during the COVID-19 pandemic triggered a buying frenzy in Canada’s housing market that’s left it as one of the world’s most unaffordable, and prompted a scramble by policymakers to try to supplement the depleted housing stock by encouraging new construction.
February brought some signs that record high prices and the beginning of the traditional spring buying season may be bringing more sellers to market. The number of new listings surged 24 per cent from the month before.
Still, demand was so strong that the ratio of sales to new listings -- a measure of market tightness -- was far above the historical norm.
“Ideally, listings will continue to come out in big numbers in the months ahead,” Shaun Cathcart, senior economist at the national realtor group, said in a press release. “Combined with higher interest rates and higher prices, we could be at a turning point where price growth begins to slow down and inventories finally begin to recover after seven years of declines.”