The value of homes in Canada has increased by 31% this year
Prices have surpassed 2020 highs and have no plans to stop.
Despite expectations, the real estate market has not stabilized. The situation began to escalate from May 2020 and already in March 2021 reached a critical point.
On April 16, the Canadian Real Estate Association released data on home sales for March 2021. The number of transactions completed was 70,000 — a 29.7% increase over March 2020. The average MLS CREA property value increased 31.6% year-over-year to stop at $716,828 CAD.
This situation is not just in densely populated cities like Toronto or Vancouver, which previously ranked among the world's most expensive cities. The price increases are happening nationally and affect even smaller neighbourhoods.
While sellers and owners are undoubtedly thrilled with record sales prices, the rapid pace of growth has economists and policymakers worried. After all, to buy a home in Canada, buyers will be forced to take out large mortgages, which they likely won't be able to afford if interest rates rise.
Last week, Canada's top banking regulator proposed raising mortgage stress tests to address the problem and lowering purchasing power by 5%. Unlike New Zealand, which has long increased mortgage rates, Canadian Banks are not acting so aggressively.
Bank of Canada Governor Tiff Macklem said in an interview for local news that residents will need time to recover from the pandemic and it is not in the interest of banks to make things worse.
At the moment, however, mortgage rates in Canada remain depressed after the pandemic, and the stress test increase will not occur until June of this year at the earliest. Due to these facts, analysts expect another jump in prices before the end of May 2021.
You can read here about rental property prices in major Canadian cities.