Average Canadian house price hits $816,720 — up 20% in past year

The price of the average Canadian home hit $816,720 in February, its highest level on record, according to the Canadian Real Estate Association.

The group, which represents 100,000 realtors across the country, said Tuesday that it was the second-busiest February ever for home selling, just behind the all-time high hit last year.

Some 58,209 homes changed hands during the month, and a surge in new listings in the latter half of the month suggests that momentum may carry over into strong sales in March, too.

The $816,720 average selling price is an increase of 20 per cent compared to last year’s level. 

CREA says the average selling price can be misleading since it is skewed by sales in big expensive markets like Toronto and Vancouver. Simply removing those two cities from the numbers shaves more than $178,000 off the average, the realtor group notes, which is why it tabulates a second number, known as the House Price Index, to adjust for the volume and type of housing being sold.

But that metric is also going up at its fastest pace on record, up 29 per cent since last year. It increased at 3.5 per cent in the month of February alone — also the biggest monthly jump on record.

The pandemic has had a counterintuitive impact on Canada’s housing market. In March and April of 2020, sales volumes and price growth slowed to a crawl as buyers reacted to the uncertainty by keeping their wallets closed. But in the almost two years since, the market has been on an absolute tear, with record-low borrowing costs — which were kept in place to stimulate the economy through the pandemic — fuelling a thus far insatiable demand for housing.

Feverish demand

For those in the thick of that demand wave, the frenzy can be overwhelming, which is why some buyers are resorting to some unconventional methods just to get into the market.

Lauren Schreiber and her husband have been looking to buy a home for themselves and their two children for a while now without success. With average prices in Toronto where they live topping $1 million, they have found themselves repeatedly outbid on houses, even when they offer well over the asking price.

Their budget is stretched thin, which is why they are working with a company called Ourboro that helps prospective buyers come up with cash for a down payment. 

There’s a catch, however — in exchange for the help, Ourboro gets an equity stake in the home and is entitled to a share of any gains when the owner sells. 

“It’s a concession to go into home buying with strings attached, but in order to achieve it, this is what we have to do,” Schreiber said.

Although the plan is not without risk, with two kids in a cramped apartment, Schreiber says they are grateful for any help they can get.

“We’ve just been watching our friends and our neighbours be renovicted for years,” she said. “We want to get ahead of that and really be able to have some security and set down roots.”

The concept isn’t new. Other companies, including Options For Homes, have used a similar model for years, contracting with buyers to bump up down payments in exchange for equity stakes in the condo that the owner can buy out when they sell, or earlier if they prefer. Unlike Ourboro, Options For Homes is the actual developer that builds the condo, too.

Torontonian Heather Benway worked with Options twice to buy two condos over the past 15 years. “Not only investing young but learning how to budget and save properly at that age made a huge, huge difference for me,” she said in an interview.

WATCH | Heather Benway credit Options For Homes with helping her:

Heather Benway worked with Options For Homes to buy two condos over the years, and she says there’s no way she would have been able to own a home in Toronto today without their help back then. 0:29

Such unconventional methods may have worked out fine for Benway, but ultimately, the high prices today are being inflated by record amounts of cheap debt.

And any owner with a mortgage should brace themselves for a reckoning on that front, as the Bank of Canada just raised its benchmark interest rate for the first time in two years.

Economists say there could be as much as another half-dozen rate hikes to come this year, which would take the central bank’s rate up to two per cent.

That’s why “the next few months could be telling,” Bank of Montreal economist Robert Kavcic said. “Demand has been boosted by expectations of rising prices and a last-ditch effort to lock in cycle-low mortgage rates,” he said. “But sentiment can change in a hurry, and this market could find balance very quickly the moment that it senses softer prices.”

Hot market in the oil patch

Prices are up just about everywhere across the country, but Kavcic said one in particular appears to be really heating up: Calgary.

Benchmark prices in the city have risen at an annualized pace of almost 35 per cent in the past three months, he said. “The fastest clip since the heady days of 2006. Relative affordability and $100 oil have clearly turned investors to that market.”

While red hot, the average price in the city is still comparatively affordable, which is what attracted buyers like Nathaly and Rob Turner to move to the city recently. They were house hunting in Ottawa where they lived and worked last year, only to discover that by the time they could save up enough of a down payment, prices had moved beyond their reach.

“Each time we try to generate a deposit to actually get into the market, it just kept getting farther and farther away from what actually we could afford,” Rob told CBC in an interview. “Every time we would put in an offer, houses would go for $100,000 or $150,000 over asking price.”

When an opportunity to move to Calgary for work came up, they jumped at the chance and were pleased to discover that the city’s housing market was more affordable compared to where they were coming from. The benchmark house price in Calgary is just over $487,000, CREA says, versus more than $718,000 in Ottawa.

“It’s definitely a huge sigh of relief to be able to own a home now and have a place to call our own,” Nathaly said.