Monday Market Minute | Jan 10, 2022
Canadian housing prices surge in January 2022 as buyers front-run expected BoC rate hikes. The last gasp before the correction.
What Moved
CREA data for late 2021 showed Canadian home prices up 26% year-over-year nationally, with Toronto and Vancouver leading the charge. January opened with bidding wars intensifying as buyers scrambled to lock in mortgages before the BoC pulled the trigger on rate hikes. Private real estate lenders reported record origination volumes as conventional bank qualification tightened under the B-20 stress test at higher projected rates.
Why It Matters
The final surge in housing activity was creating a two-sided opportunity for private markets participants. Mortgage investment corporations and private lenders thrived on high origination volumes, but the same frenzy signalled peak pricing. Investors in private real estate funds needed to distinguish between platforms deploying capital at cycle-top valuations and those exercising discipline.
Signal to Watch
CMHC's housing market assessment — the agency had been flagging overvaluation risk for months, and the combination of peak prices and imminent rate hikes was building a correction catalyst.