The spring housing market in Canada will likely see more heated bidding wars as an active January led to a steep drop in active listings in most parts of the country, a new report said Wednesday.

Real estate agency Re/Max said the prospect of higher interest rates, the arrival of the Harmonized Sales Tax in Ontario and B.C. in July, and recent changes to modestly tighten mortgage financing rules have prompted an "unprecedented number of purchasers" to enter the market.Finance Minister Jim Flaherty answers questions on Feb. 16, 2010, after tightening mortgage rules to limit speculation and discourage homeowners from taking on too much debt. (Pawel Dwulit/Canadian Press)

As a result, too many buyers will be chasing too few homes in the next few months, it predicted.

Sales increased in 88 per cent of the markets Re/Max surveyed in January, according to the agency's 2010 market trends report, led by a 152 per cent increase in Vancouver.

One of the tightest markets is in Toronto, where the number of listings in January was down 41 per cent from the sluggish market of a year earlier. Kitchener-Waterloo, Ottawa, Victoria and Vancouver are other markets where inventories of available homes are tight, it said.

"There have never been so many motivating factors in play at once," said Michael Polzler, executive vice-president of Re/Max in charge of Ontario and Atlantic Canada.

"We're in for a heated spring market that will, in all probability, spill over into the summer months as the window of opportunity draws to a close.

"The supply of homes listed for sale has been drastically reduced, housing values are once again on the upswing, and banks and governments are moving in unison toward stricter lending policies."

The report said the upward pressure on sales and price isn't likely to fade "unless more inventory comes on stream."

Assessments like that are sure to once again raise questions about whether the Canadian housing market is too frothy and is about to fall — in other words, is it in bubble territory?

The most recent MLS data showed that the average resale home in Canada sold for $328,537 in January — up 19.6 per cent from the weak market of a year earlier. Sales were up 58 per cent.

Some market observers say housing prices could well ease later this year.

"If you wanted to buy a house, wouldn't you now do it before April?" asked RBC chief economist Patricia Croft in a CBC interview last week, referencing the timing of the tighter new mortgage lending rules announced by Finance Minister Jim Flaherty, which take effect April 19.

"It's even more evidence that house prices are going to cool down later this year."