Canadian Real Estate Prices Are $296,000 Higher Since BoC Lowered Interest Rates

Canadian real estate prices aren’t cooling against the threat of higher interest rates. Canadian Real Estate Association (CREA) data shows it did the opposite in February. Prices were already growing at a fast rate last year, and that rate has nearly doubled since. Loose policy disrupted the real estate cycle, pushing the market into uncharted waters.

Canadian Real Estate Prices Increased Over $43,000 Last Month

The price of a typical (“benchmark”) home across Canada showed no sign of slowing down last month. The benchmark price hit $869,300 in February, up 5.3% ($43,500) from a month before. Prices are now 29.2% ($196,700) higher than the same month last year. It’s important to remember this isn’t just pricey regions like Toronto and Vancouver. A typical home across Canada is now within spitting distance of 7-figures.

Canadian Residential Real Estate Benchmark Price

The composite benchmark price of a home across Canada, in Canadian dollars.

Source: CREA; Better Dwelling.

Canadian Real Estate Prices Have Never Grown This Fast

The benchmark’s monthly and annual price growth are both at record levels. A monthly price increase of $10,000 is something that rarely occurs at the national level. We’re talking more than four times that increase last month. It’s something only seen before in the frothiest of markets, not across a whole country.

Annual growth reached a new record as well. February beat out the previous month by 1.2 points. A year ago, everyone thought annual growth at 17.4% was lofty. The market has grown another 29.2% since then. Historic annual growth data shows this is a highly unusual situation. The Bank of Canada (BoC) flooding the market for way too long distorted the typical real estate cycle.

Canadian Residential Real Estate Benchmark Price Growth

The 12-month rate of growth for the Canadian composite benchmark price.

Source: CREA; Better Dwelling.

Excess Credit Disrupted Canada’s Normal Real Estate Cycle

Looking at annual growth, you can see the peaks and troughs of the previous cycles. Significant surges in price growth are typically followed by horizontal movement. This extended breather helps the economy catch up so incomes are in line with housing. Using as much fire power as possible, the BoC hit the market during the period where it should be catching up. 

In 2020, unprecedented stimulus from low rates threw gas on the fire. Then when the BoC didn’t think that fire was burning hot enough, they used more accelerants. Mortgage bond buying and quantitative ease (QE)  were used to drive record demand. Low rates are needed, but QE and additional bond buying might be considered excessive. They weren’t stimulating a lack of market activity, but stimulating at record highs.

Over a year ago, the BoC was first asked if the amount of stimulus needed was getting to be excessive. The Governor replied, “we need the growth” when asked if the market was overheated. Canadian banks believe interest rates are rising a year late. That creates a whole different set of problems to correct. One bank has forecast interest rates will now need to rise much higher and more sharply. What could have been a gentle increase to cool inflation now requires a serious shock.

7 Comments

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  • cto 5 months ago

    “now requires a serious shock”
    But will they actually do it???
    CBs are terrified to raise rates and governments cant stomach the mere thought of it….
    Why wouldn’t they find any old excuse to leave rates low,,, and let the chips fall where they may, from high inflation levels?

  • Ron Bruce 5 months ago

    BoC Lowering Interest Rates sounds like an inside job for those at BoC owning Real Estate. Will anyone be charged for manipulating (aiding and abetting) the outcome to benefit a few? Canada’s Finance Minister is unlikely to do anything, as accountability is the last thing she will consider. The result was $Billions in inflation for the average taxpaying Canadian. And the Canadian Real Estate Agency (casino) is in the mix to help Realtors make more money from higher real estate prices.

  • Arthur 5 months ago

    Canadian Real Estate Association’s (CREA) purpose as always is to promote an over priced realtor membership – not to be confused with it’s own integrity or those of it’s members. CBC’s Market Place recently showcased how much CREA publicly reacted to realtors breaking the law.
    Can we please have some indication of the corroboration conducted on CREA’s data or lack thereof of before publishing their opinions as fact? It’s not as if CREA want to make the source data available outside of their members. Maybe some consideration should be given to throwing CREA propaganda into the trash can rather than giving CREA a free forum. Or maybe you charge them 5 or 6% of purported sales growth figures per article? Is it time for “Market Place” to audit CREA data?

  • Woolsock 5 months ago

    Simple but possibly effective idea: allow public comments for each listing on MLS.ca

    See if some dense online public opinion doesn’t drop the proverbial control rods on this market before it completely melts up/down.

  • Pissed off guy 5 months ago

    I personally know few new immigrants who are questioning to themselves about their decision to immigrate in Canada. Unfortunately, the situation will only get worse from here.

  • Agent bob 5 months ago

    The government and BOC have screwed all Canadians that had hopes to have a roof over their heads. Never mind owning , renting a decent place is now unattainable for many.

    Prices have gone crazy since Trudeau got back in last fall mainly because they promised to put a 2 year moratorium on non residents. Foreign buyers have been furiously buying before they thought they would be shut out in January of 2022 but guess what; the government just voted not to implement this law.
    I am a real estate broker and have been working in the GTHA for over 40 years. I can tell you that the percentage of non residents buying is far higher than reported.
    Get hold of your local MP and push for them to reverse that vote in the upcoming budget.
    Most countries in the world do not allow non resident buying. That’s why they they are all coming here.

    Oh, and by the way, money laundering must be stopped here. It is estimated that up to 130 billion per year is ‘ Snowashed ‘ here with much of year going into real estate.
    Get on your MP about these issues!

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