Monday Market Minute | Apr 18, 2022
Canadian home sales drop sharply in Toronto and Vancouver as BoC rate hikes trigger the housing correction. MICs and private lenders adjust.
What Moved
CREA data confirmed what the market had been bracing for: Canadian home sales fell sharply in March, with Toronto and Vancouver posting year-over-year declines exceeding 30%. The average national home price had peaked in February at $816,720 and was now declining. More telling than the headline numbers was the collapse in buyer urgency — bidding wars had evaporated, conditional offers returned, and days-on-market lengthened. The correction that CMHC and the BoC had warned about was underway.
Why It Matters
For private real estate investors, the correction posed a bifurcated challenge. Mortgage investment corporations faced a stress test: higher rates improved lending margins, but declining property values eroded collateral coverage. The quality divide between conservatively underwritten MICs (low LTVs, prime markets) and aggressive ones (high LTVs, pre-construction) would widen dramatically. Private equity real estate funds faced mark-to-market pressure on recently acquired assets.
Signal to Watch
MIC redemption request volumes — a surge in withdrawal requests amid declining property values could trigger liquidity stress in less disciplined funds.