House prices up by 11.01% during the year to Q1 2022

Canada’s house price growth has been accelerating, amidst an ongoing supply-demand imbalance. Real house prices in the country’s eleven major cities rose by a huge 11.01% during the year to Q1 2022, following y-o-y growth of 8.39% in Q1 2021 - amongst the highest annual increases ever recorded. Quarter-on-quarter, house prices rose 1.5% in Q1.

Demand remains high; construction activity mixed

The central bank has taken action repeatedly in recent years – raising mortgage downpayment requirements and reducing amortization periods, among others – in an effort to reduce speculative buying and avoid a disastrous housing market crash. This resulted in a sharp slowdown in house price growth in 2018 and 2019. But as the impact of these curbs has waned, the housing market bounced back starting 2020 despite the pandemic, and the house price growth has been accelerating since.

In March 2022 sales transactions were 16.3% below the all-time record, which occured the previous year, in the same period, according to the Canadian Real Estate Association (CREA). In 2021, sales transactions totaled 666,995 residential properties, surpassing the annual record of 552,423 sales for all of 2020.

In Q1 2022 housing starts fell by 18.3% y-o-y to 48,357 units, while completions increased 10.7% to 50,928 units. 

Rents, rental yields: moderate yields, around 4% to 6%  

Toronto apartment costs are around $9,409 per sq.m. 

Canada: typical city centre apartment buying price, monthly rent (120 sq. m)
  Buying price Rate per month Yield
Montreal   $348,600    $1,564 5.38%
Toronto   $1,129,080    $3,740 3.98%

Recent news: Canada’s economy expanded by about 5.6% in Q1 2022 from a year earlier, following growth of 6.7% in Q4 2021 and 5.5% in Q3, buoyed by strong consumption and business investment, as well as a rebound in exports amidst the easing of pandemic-related restrictions. 

The Canadian economy is projected to grow by a healthy 3.9% this year, following a 4.6% expansion in 2021, according to the International Monetary Fund (IMF). The Bank of Canada (BoC)’s latest growth projection is more optimistic at 4.25%, amidst robust business investment, labour productivity growth and higher immigration.

In April 2022, the BoC raised its key rate by 50 basis points to 1%, its second consecutive rate hike and the biggest in two decades, pushing borrowing costs to its highest level since the Covid-19 pandemic started.