Monday Market Minute | Nov 08, 2021
The Canadian housing market defies expectations of a slowdown, with autumn activity remaining robust despite tighter stress tests and pending rate hikes.
What Moved
CREA's October data showed the Canadian housing market defying predictions of a meaningful autumn slowdown. Transaction volumes remained elevated, prices continued to climb in most markets, and the sales-to-new-listings ratio stayed firmly in seller's territory. The June stress test tightening had reduced the purchasing power of individual buyers by roughly 5%, but aggregate demand proved more resilient than expected — driven by strong employment recovery, accumulated savings, and persistent immigration-fuelled population growth in key urban centres.
Why It Matters
For private market investors in residential real estate strategies, the market's resilience was double-edged. On one hand, it validated collateral values and supported MIC portfolio performance. On the other, it meant that the BoC's housing concerns — which had partly motivated the taper and rate hike signals — remained unaddressed. The policy implication was that rate hikes, when they arrived, might need to be larger or faster than otherwise necessary to cool a market that had shrugged off every moderation attempt.
Signal to Watch
CMHC's updated housing market assessment, due in December, would provide the most comprehensive analysis of vulnerability across Canadian markets. Elevated risk ratings could foreshadow additional macroprudential measures beyond rate hikes.