What Moved
The Bank of Canada held at 0.25% on March 10, maintaining emergency-level rates. The Bank's tone was cautiously optimistic — the economic recovery was stronger than projected — but it reiterated that substantial slack remained and rate increases were not imminent (BoC, Mar 10, 2021).
The one-year anniversary of the March 2020 crash provided a striking comparison. The TSX was up over 70% from its pandemic low. Canadian real estate investing had moved from frozen activity to the hottest market in memory. Private credit, which faced existential questions twelve months earlier, was now the beneficiary of record capital inflows.
Housing data for March was extraordinary. National sales reached their highest level ever recorded for the month. Average prices in the Greater Toronto Area exceeded $1.09 million — up 21.6% year-over-year. Smaller Ontario markets like Kitchener-Waterloo, Hamilton, and Ottawa saw even larger percentage gains as the pandemic-driven suburban migration continued (CREA, Mar 2021; TRREB, Mar 2021).
PE deal activity was picking up, with several notable Canadian mid-market transactions announced across technology and healthcare sectors.
What It Means
The March data confirmed that Canada was in the midst of a housing boom of historic proportions. For private market investors — particularly those in mortgage-backed credit — this was both opportunity and warning.
The opportunity was straightforward: every housing transaction potentially generated private lending business. Bridge loans, construction financing, renovation lending — the full spectrum of MIC activity was supported by high transaction volumes and rising prices. MIC origination pipelines were overflowing, and managers were in the enviable position of being able to select only the strongest opportunities.
The warning was equally clear: no housing boom lasts forever. Canadian housing had now appreciated so rapidly that affordability was deteriorating sharply. At some point — whether through rate increases, regulatory intervention, or simple exhaustion of demand at these prices — the boom would end. The private credit originated at peak prices would face the most scrutiny when it did.
The one-year anniversary also provided a useful perspective check. Twelve months earlier, markets were in freefall and private credit was facing a potential crisis. The speed of the recovery was a reminder that cycles move in both directions — and that both panic and euphoria tend to overshoot.
What We're Watching
Federal government response to the housing boom was a growing question. Calls for intervention — tighter stress tests, limits on blind bidding, speculation taxes — were increasing. Any regulatory action could affect housing transaction volumes and, by extension, private lending.
April would bring Q1 earnings data and economic indicators that would inform the BoC's next rate decision in April. Any upgrade to the Bank's inflation or growth forecasts could shift rate expectations.
Private credit fundraising data for Q1 would quantify how much capital had entered the sector during the RRSP season — an important indicator of future competitive dynamics.
Closing
March 2021 was a month of records and milestones — in housing, in market recovery, and in the contrast with one year prior. For Canadian alternative investments broadly, the environment was the most favorable in years. Making the most of it required the discipline to be selective even when everything appeared to be working.
For the full quarterly analysis, see Q1 2021: The Everything Rally.
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