Canada’s real estate prices skyrocketed by 25% because of restrained supply

Last month, Canadian real estate prices rose by more than 25% from a year ago, pushed by an extreme lack of supply.

According to the Canadian Real Estate Association (CREA), the listings gain during the period from October to November wasn’t enough to meet the market demand. CREA’s latest report says the benchmark home price went up to $790,600.

“The supply issues we saw in 2020, which intensified this year, are even tighter as we’re getting close to 2022,” – Shaun Cathcart, CREA’s chief economist, noted. “This problem will remain top of mind.”

Extremely low mortgage rates and strong demand for larger properties during the COVID-19 pandemic have made Canada one of the hottest real estate markets in the world during the previous two years. Now, as the Bank of Canada is signalling about possible rate hikes in 2022, while we are facing a record flow of immigrants, buyers seem to have a new reason to enter the market.

In November, the national home sales were up by 0.6% from October. Meanwhile, the number of newly listed properties rose by 3.3%. However, the gain was still not enough – Canada had just 1.8 months of housing inventory nationally, marking another lowest result like in March.

Last month, the construction of more than 300,000 new properties started, which is the strongest result on record, pointing to the fact that developers are beginning to react to the housing shortage.

Prime Minister Justin Trudeau promised more homebuilding during his election campaign this fall. Nevertheless, many issues concerning development depend on local and provincial governments.

CREA expects home prices to keep growing next year.