TORONTO -- Rock-bottom interest rates, a scarcity of supply and growing demand from millennials and wealthy immigrants have fuelled a strong start to the spring real estate season in Toronto and Vancouver.
"Spring has come early for both Toronto and Vancouver," said Sal Guatieri, a senior economist at BMO Capital Markets.
Both cities experienced growth in sales volumes and prices during the first two months of the year, Guatieri said.
"I would expect the spring market to be quite hot in both cities -- but that will be the exception across the country, not the norm."
In Toronto, February home sales grew by 11 per cent from a year ago while prices jumped nearly eight per cent, according to statistics from the Toronto Real Estate Board. That's despite the fact that it was one of the coldest Februaries on record for the city.
"I've always said that our climate naturally has a natural cooling effect on our real estate market," said Claude Boiron, a Toronto-based broker with Royal LePage Terrequity Realty.
"You would think this year, with the extreme cold, that there would have been an extreme cooling, but that really didn't happen. The amount of demand just continues to increase."
The number of active listings -- which indicates the supply of homes for sale -- at the end February dropped by 8.7 per cent from a year ago, leading to heightened competition between buyers.
In Vancouver, home sales were up 21 per cent in February compared to a year ago, while prices rose by 6.4 per cent.
The average price of a detached home -- an increasingly rare commodity in space-constricted urban centres -- tipped over the $1 million mark in both cities this year.
Meanwhile, the spring outlook for other markets across the country is less rosy. Alberta and Newfoundland are likely to see their real estate markets continue to soften due to the impact of lower oil prices on their economies, Guatieri said.
"We do think oil prices will steady later this year, but the next few months could be a bit rough for the housing markets in those regions," Guatieri said.
He noted that "even high-flying Saskatchewan has lost a lot of steam recently," with home prices in Regina and Saskatoon, which had been rising rapidly, beginning to fall.
Real estate markets in Quebec and Atlantic Canada, which have cooled considerably, are expected to be remain relatively stable, Guatieri said.
"Those markets have been cool for some time now. Demand has been weak ... Listings have shot higher. Prices are either very steady or, in many cases, falling modestly. I don't see signs of a turnaround."
But as immigrants continue to flock to Toronto and Vancouver and millennials enter their prime homebuying years, demand for housing will remain strong, Guatieri said. Toronto and Vancouver's real estate markets will only start to cool once interest rates begin to rise, Guatieri said.
Despite the flood of buyers into the Toronto and Vancouver markets, mortgage expert Rob McLister says the banks have not been as aggressive in trying to woo customers with mortgage rate discounts as in previous years.
"When it comes to mortgage rate promotions, it's been whisper quiet compared to the last few Februaries and Marches," said McLister, who is the founder of RateSpy.com.
In addition to trying to maintain their profit margins, McLister says the banks are wary of drawing the ire of policy-makers, "many of whom don't want flashy rate wars to further stoke demand in Canada's overheated housing regions."
