Business Blog

By Leah Walker – Not only has the housing market staggered to its knees, but it’s now showing signs of sparring. Canadian housing has made a remarkable turnaround, to the point where the Bank of Canada is now keeping an eye on its growing strength as a potential influence on interest rates.

Royal Lepage says prices have increased the past two months in a row and a shortage in housing supply is leading to bidding wars in several cities, including Toronto, Montreal, St. John’s, Saint John, Moncton, Edmonton, Calgary, North and West Vancouver, and Victoria.

In its report on home prices and sales, Remax says the bounce-back that began in early spring has made this recession one of the shortest on record for real estate, saying “low interest rates, pent-up demand, and improved affordability levels have all played a role in the recovery now under way”.

Our Central bank’s rock-bottom rates have helped spur to action first time homebuyers, and homeowners who were putting off selling their homes in the midst of the downturn are now polishing countertops and putting that home renovation tax credit to work to compete with a new crop of houses for sale. 

The Reserve Bank of Australia recently became the first major central bank to raise interest rates since the financial crisis, citing among other things, rising home and stock prices.

TD Economics suggests that increased supply will likely cool the market here somewhat. The question, Deputy Chief Economist Craig Alexander asks though, is what if it doesn’t? He’s suggesting the Bank of Canada might just give interest rates a jab higher sooner than expected if this keeps up.

It may be floating like a butterfly now, but let’s hope the housing market doesn’t end up stinging like a bee.