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A realtor’s sign in front of a home on Bridge Road in Oakville, Ont., that sold for over asking is photographed on Feb. 15, 2022.Fred Lum/The Globe and Mail

Canadian home prices hit a fresh high in January, with price acceleration kicking into high gear as frenzied buyers raced to buy properties and the number of new listings dropped.

The national home price index, which adjusts for pricing volatility, jumped a record 2.9 per cent to $836,300 from December to January on a seasonally adjusted basis, according to the Canadian Real Estate Association (CREA). Those gains come after months of elevated price increases over the course of the pandemic’s property boom and blowing past the country’s previous real estate frenzy in 2016-17.

Compared with January of last year, the home price index is 28 per cent higher, breaking December’s record year-over-year price jump, with prices soaring in the suburbs and less-populated areas.

“It is the most frenzied real estate market that I have ever experienced,” said Tamara Stone, a B.C. realtor who has sold houses in Kelowna for nearly 27 years. “It’s absolutely chaotic,” she said.

Currently, there are 1.6 months of inventory remaining, referring to a measure of the amount of time it would take to sell all the listed properties if the pace of sales remained the same as January. The long-term average has been just over five months.

New home listings dropped 11 per cent from December to January, as fewer homeowners listed their properties for sale last month. There were 55,043 resales last month, slightly higher than in December but down about 10 per cent from January of last year.

Robert Kavcic, senior economist with Bank of Montreal, said psychology seems to be playing a big role in the market right now.

“There are expectations that home prices will keep rising quickly. This pulls more investors into the market, creates an urgency among potential buyers, and probably holds back listings as well,” he said in an e-mail. “Why sell today when you can get 10 per cent more tomorrow?”

The home price index jumped at least 4 per cent from December to January in B.C.’s Fraser Valley and the Chilliwack area, as well as cities near Toronto, such as Barrie, Hamilton and Burlington. The index spiked at least 6 per cent month over month in Kitchener-Waterloo and Simcoe, other regions outside of Toronto.

And near Toronto in Oakville and Milton, the home price index was up an astounding 7.1 per cent from the previous month to $1,646,000. “It is a big increase. Strong demand, no supply,” CREA senior economist Shaun Cathcart said.

The Bank of Canada is expected to start raising interest rates in March, which will make it more expensive for home buyers to borrow. But that is not expected to dissuade buyers, according to CREA.

Under the federal mortgage stress test, borrowers must prove they can make their mortgage payments at an interest rate of at least 5.25 per cent. That is more than double the market rate for a five-year fixed mortgage, which is one of the more popular types of mortgages in Canada.

“A rate hike won’t take them out of the market,” Mr. Cathcart said. “If they are preapproved for 90 to 120 days, they might want to pull the trigger before that expires. But they all have to qualify at the stress-test rate, which is much higher.”

The beginning of the pandemic’s real estate boom was driven by Canadians looking for bigger properties when they could work at home. That increased prices in suburbs and less-populated regions such as Kelowna and the Okanagan Valley.

Ms. Stone said her firm, RE/MAX Kelowna Stone Sisters, has been working with many Toronto buyers who are often purchasing properties without viewing the home in person and outbidding everyone else.

Ms. Stone said the pace has been unrelenting, with almost every home drawing multiple offers and selling over asking. “There’s no justification for some of these prices,” she said.

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