It seemed as one of those unshakable facts that Vancouver reigns supreme as Canada’s priciest market. It’s been so for such a long time (decades!) and by such a wide margin. Not anymore. Toronto took that crown last month. Early reports from local real estate boards showed Toronto’s composite MLS HPI benchmark ($1.260 million) edging out Vancouver’s ($1.255 million) in January. It’s a stunning development though not entirely surprising considering how hot the Toronto-area market has become, especially since the fall. Toronto’s benchmark price soared over the past five months, including a mind-blowing 4.3% monthly increase—or nearly $52,000—in January alone. Vancouver prices have accelerated as well, just not to the same extent.

Solid demand and a dearth of supply kept conditions steamy in Canada’s major markets as 2022 rolled in. A significant jump in home resales in Calgary last month provided evidence the vigour is in fact continuing to broaden. Our view is that activity will stay exceptionally strong in the near term nationwide though we expect the Bank of Canada’s rate liftoff will start cooling things down later this year. Accompanied by an expected material increase in housing completions, we believe this will gradually ease the extreme imbalance in the market and in time moderate the pace of price appreciation. Please see The fever breaks: Canada’s housing market will cool but stay strong in 2022 for more details about our year-ahead market outlook.

Toronto area—Now the priciest market in the country

It’ll take more than a spike of Covid-19 cases and a major snowstorm to meaningfully slow down the market. Activity stayed exceptionally robust last month despite pandemic restrictions being re-imposed and Mother Nature dumping the thickest coating of snow in a decade on the region, as home resales ticked down just 0.7% from a strong December level. Scarce inventories no doubt held back the pace once again. Active listings ended the month still near historical lows (down 44% y/y). Competition between buyers is as fierce as ever. Intense bidding wars have pushed prices to new heights both in level ($1.260 million for the composite MLS HPI benchmark) and rate of increase (33.3%). In fact, the Toronto area has now become the priciest market in Canada, with its benchmark price surpassing that of the Vancouver-area ($1.255 million) for the first time in decades. Buyers are especially fond of single-family homes (prices are up an astounding 36% y/y, with gains exceeding 40% in Durham and Peel regions) but also increasingly interested in condos (prices up 26% y/y). We see little that will materially alter these trends in the near term though expect that higher interest rates will gradually cool things down later this year.

Montreal area—Holding up firm

Market activity has trended largely sideways since spring 2021. January was no different with home resales staying within the recent range, off just a modest estimated 3% from December. The larger 27% y/y drop was more a reflection of the unusual strength a year ago. The dearth of homes for sale in the Montreal area continues to a significant impediment for the market. And that’s being felt across the region with active listings at rock-bottom levels on the Island, Laval, and both North and South Shores. Sellers hold a very strong bargaining position everywhere in the region. Buyers, though, have bid up prices more aggressively in the suburbs—the North and South Shores in particular—where median prices have risen the fastest in January (up between 18% and 35% y/y). With suburban prices still running at 16% to 30% discounts to Island prices, we expect these dynamics to continue in the near term.

Vancouver area—New year, same challenges

Rock-bottom inventories continue to be a major irritant for buyers as we enter 2022. Active listings barely increased from a decades-low last month, significantly restraining buying opportunities. Still, we estimate home resales rose 8% m/m (seasonally-adjusted)—though they were down 4.4% relative to exceptionally strong levels a year ago—as buyers pounced on what new listings became available. Successful bidders had to be more aggressive on offered prices. This drove up the area’s composite MLS HPI benchmark 18.5% y/y to a new high of $1.255 million. Single-family home prices (up 22.7% y/y) led the increase though condos (up 14%) continued to narrow the gap. We expect tight demand-supply conditions will maintain considerable upward price pressure on all housing types in the near term.

Calgary—Booming start to the year

The market came flying out of the gate in January, with activity reaching an all-time high for the month. Home resales soared 66.4% y/y and an estimated 23% m/m on a seasonally-adjusted basis. Demand was exceptionally strong for single-family homes. Yet it was condo apartment transactions that grew the fastest (up 94% y/y). Inventories are less constrained for condos (down 19% y/y) than they are for single-family homes (down 47% y/y). Demand-supply conditions got significantly tighter overall last month, adding steam to prices. The composite MLS HPI accelerated further to a rate of 11.7% y/y. We expect even steeper increases in the near term. The stronger prospects for the provincial economy—led by a rebounding energy sector—has significantly boosted confidence in the housing market over the past year.

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Robert Hogue is a member of the Macroeconomic and Regional Analysis Group, with RBC Economics. He is responsible for providing analysis and forecasts for the Canadian housing market and for the provincial economies. His publications include Housing Trends and Affordability, Provincial Outlook and provincial budget commentaries.

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