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File photo of a house that sold for over asking price in Toronto.Moe Doiron/The Globe and Mail

Canada's central bank is warning about a correction in three of the country's largest housing markets as home values continue to soar in Toronto and Vancouver even as they fall across Alberta.

The Bank of Canada has long called for a "soft landing" in the national housing market. It reiterated that prediction on Wednesday, but for the first time raised explicit concerns about the possibility of corrections in several key housing markets and warned of the risks to the broader economy should regional housing market downturns start spilling across provincial borders.

"The adverse impact of the oil price shock in Alberta and continued robust price growth in Toronto and Vancouver suggest a risk of a correction in these markets," the Bank of Canada warned in its latest monetary policy report. "While historical experience suggests that localized Canadian house price cycles, both in terms of the factors behind the boom as well as the correction, have typically not spilled over to other regions, it would be a major event if it occurred."

The warnings come amid further evidence that Canada's housing market is dividing in two, with prices showing double-digit gains in the most competitive markets, while falling in others.

Nationally, the average resale home price hit $439,144 in March, jumping 9.4 per cent compared to a year earlier, the Canadian Real Estate Association said.

However, nearly all of that growth came from Vancouver and Toronto. Home sales have skyrocketed by more than 50 per cent over the past year in Vancouver and risen nearly 11 per cent in Toronto. Fierce bidding wars for single-family houses have pushed up average resale prices in both cities by more than 11 per cent. Demand for expensive luxury homes in the two cities is at "the highest on record" so far this year, real estate company Royal LePage said.

Outside of those markets, however, prices grew an average of just 2.4 per cent compared to last March, the real estate board said, while prices have fallen in recent months in resource-fuelled cities such as Regina and St. John's, along with markets like Ottawa and Saint John.

In Calgary, where prices have fallen for four months straight, the panic over falling oil prices appeared to be subsiding. The number of new listings fell for the second month in a row. Sales rose more than 12 per cent in both Calgary and Edmonton compared to February, although they remain far below where they were a year ago.

Toronto-Dominion Bank economist Diana Petramala predicted more pain for housing markets in Alberta and Saskatchewan, however, where "economic consequences of the plunge in oil prices are likely only starting to be felt."

Overall, the real estate association's benchmark home price index rose 4.95 per cent in March compared to a year earlier, the smallest gain since January 2014 and a sign that many economists took to mean the market was in the midst of its long-awaited soft landing.

However, the national picture masks not only a stark regional divide, but a growing gulf between single-family homes and high-rise condominiums.

The benchmark prices for resale single-family homes sold on the Multiple Listing Service rose 5.8 per cent in March compared to a year earlier, while condo prices were up by just 2.4 per cent.

In its quarterly survey of the housing market, real estate agency Royal LePage said prices of two-storey detached homes jumped 5.3 per cent in the first quarter of the year to $451,463, while prices of detached bungalows rose 6.6 per cent to $405,895. The average price of condos rose just 3.8 per cent, to $261,782.

The effects of a condo building boom are finally being felt in Toronto's rental market. In the Greater Toronto Area, the number of newly registered condos jumped by 42 per cent in the first quarter of the year, said market research firm Urbanation Inc. Not all of those units were destined for the rental market, but the glut of supply helped push the lease-to-listings ratio, which measures the strength of the condo rental market by comparing newly signed leases to the number of newly listed rental units, to its lowest level since 2010.

Rents have actually fallen over the past year in some areas of the city that have seen an influx of new construction, such as the downtown core, as landlords have preferred to drop their rents rather than let vacant units sit empty.

That has helped keep the city's vacancy rate extremely tight, at just 1.3 per cent. But with more than 22,000 condo units built since last June that are not yet reflected in condo market official statistics, vacancies may start climbing later this year, warned Urbanation vice-president Shaun Hildebrand.

"With rent growth now barely treading water, it is a reflection that supply pressures are mounting and competition between landlords to keep units occupied has intensified," Mr. Hildebrand wrote.

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