Canadian housing market accelerated into 2016, raises risk of a deep correction

The Canadian housing market accelerated into 2016, with tighter market conditions pushing the average home price above $470,000, up 17% from a year ago. Sales were up 0.5% on a m/m basis and 8% year-over-year, while listings fell by 4.9% in the month.

Some of the strength in demand in January may be attributed to buyers pulling sales forward to get in before higher required down payments for insured mortgages between the price of $500,000 and $1 million kicked in yesterday (February 15th). Markets with the most strength in January are ones where the average sales price was either fairly close to or in that price range.

"As we head into 2016, the combination of weaker economic conditions, tighter financial market conditions and a number of regulatory changes are likely to outweigh the low interest rate environment across most markets in Canada. Every month of double-digit home price growth raises the risk of a deeper home price correction down the road." said TD Economics in a report.