Monday Market Minute | Apr 18, 2022

Toronto and Vancouver home sales plunge 30% as rate hikes trigger the correction everyone expected

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.

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