'The top is off': Canadian home prices show signs of cracking

Realtors and economists alike see a shifting tide after Canada’s home prices surged by more than 50 per cent over the past two years.

Realtor Adil Dinani has a front-row seat to the cracks starting to show in one of the world’s hottest markets. A month ago, bidding wars between as many as 20 potential buyers were common for his listings in Vancouver. Now, occasionally only a single offer turns up — some people are even feeling bold enough to haggle. 

“The top is off,” Dinani said of Canada’s record housing boom. He estimates the frenzy hit its peak sometime in February.

Realtors and economists alike see a shifting tide after Canada’s home prices surged by more than 50 per cent over the past two years. Higher mortgage rates are pulling down purchasing power just as politicians are piling on measures to rein in the market. Although these changes have yet to show up in aggregate price data, which continue to rise, industry veterans are saying things may have finally reached a tipping point.

“We could see some outright price declines,” said Robert Hogue, a senior economist at Royal Bank of Canada. He says markets like Toronto and Vancouver, the country's two most-expensive cities, could post “single-digit declines” in the second half of the year.

While forecasting a crash in the Canadian real estate market has been a futile game for much of the last three decades, there is precedent for at least a temporary dip. About five years ago, prices in both Toronto and Vancouver declined when government policies to slow the market coincided with the central bank raising interest rates. That mirrors what’s happening now and could point to another potential slowdown. 

Canada may also be offering a glimpse of the future to the rest of the world.