Canada's largest housing market logged another month of record sales and price gains in March. The head of the local real estate board is warning of potential unintended consequences as Bay Street pundits make the case for policy intervention.

There were 15,652 property sales across the Greater Toronto Area (GTA) last month, representing a 97 per cent jump from the same month a year earlier, according to the Toronto Regional Real Estate Board (TRREB). The board noted that sales in the second half of March were up 174 per cent on a year-over-year basis.

The average selling price in March climbed 21.6 per cent year-over-year to $1,097,565 amid a relative dearth of inventory as active listings slumped 0.7 per cent.

The heat in the GTA was particularly evident outside of the City of Toronto last month. Indeed, detached property sales surged 111.6 per cent year-over-year in the so-called 905 region, which includes cities such as Mississauga, Hamilton and Oakville. The average selling price for those detached homes in that surrounding region rose 31.4 per cent, which was the strongest price growth logged for any of the major categories tracked by the real estate board.

The data released by TRREB on Tuesday is the latest reminder of the potent combination of low interest rates and the work-from-home trend, which have combined to propel demand for more space among home buyers – particularly outside the country's largest cities.

As that demand drives up prices, a flurry of prominent voices have spoken out on the stakes for Canada's economy. Rosenberg Research & Associates Inc. President David Rosenberg, who predicted the collapse in U.S. housing that triggered the 2008-09 financial crisis, earlier this month described Canadian housing as "one of the biggest bubbles of all time." 

More recently, RBC Senior Economist Robert Hogue said policymakers should be putting "everything on the table, including sacred cows like the principal residence exemption from capital gains tax." 

On Sunday, Scotiabank Senior Economist Jean-Francois Perrault made it clear he and his team don't share that view, telling clients in a report that lifting the exemption "should not be considered."

That argument is in line with TRREB's outlook for potential policy actions. In the release detailing March's red-hot activity, the real estate board's chief executive officer, John DiMichele, repeated a familiar argument: the solution is in bolstering supply, not stamping out sources of demand.

"The current state of the market has reinvigorated discussions about potential demand-side policy interventions,” he said. “Policies focussed on demand, such as a capital gains tax on primary residences, can have a short-term impact, but can also be fraught with unintended consequences like further stifling the supply of listings."