Post Category: Monthly Reports
August 14, 2018

Seasonal pressures explain the rise of the Composite index in June and July

In July the Teranet–National Bank National Composite House Price IndexTM was up 0.8% from the previous month.[1] As in June, the gain might seem large but was below the historical average for the month (1.0% for July). If the index were purged from seasonal variations, the so-called “seasonally adjusted” index would have retreated in June and would have been flat in July

As in May and June, prices were up in 10 of the 11 metropolitan markets surveyed, led by Ottawa-Gatineau (2.3%), Winnipeg (1.9%), Montreal (1.3%), Halifax (1.2%) and Hamilton (1.1%). For Toronto the index rise matched the countrywide average of 0.8%. The index was also up for Edmonton (0.7%), Quebec City (0.6%), Vancouver (0.4%) and Victoria (0.4%). The index for Calgary was flat.

The published (non-seasonally-adjusted) Toronto index rose for a fourth straight month in July. In contrast, the seasonally adjusted index would have declined for a fourth straight month. This means that the recent monthly rises in the published index reflected only seasonal pressures instead of an underlying trend. The retreat of the seasonally adjusted index over this period was due to non-condo housing[1] (−2.1%); the seasonally adjusted condo subindex was up 1.6%. These numbers are consistent with market conditions, tighter for condos than for other housing. The monthly rise of the Vancouver and Victoria indexes has slowed markedly since last September. Seasonally adjusted, both indexes would have been down in July for a second consecutive month. The index for Montreal stands out for its advance in 17 of the 19 months since January 2017, a showing equalled only by Vancouver.

In July the composite index was up 1.8% from a year earlier, the smallest 12-month rise since July 2013 and a 13th consecutive deceleration from the record gain of 14.2% during the year ending June 2017. The main contributor to the slowdown was Toronto, the largest metropolitan market, down 4.0% from a year earlier, followed by Hamilton (−1.5%) and Calgary (−0.1%). There were small 12-month rises in Edmonton (0.3%) and Quebec City (0.6%) and rises exceeding the countrywide average in Winnipeg (2.5%), Montreal (4.0%), Ottawa-Gatineau (5.1%), Halifax (5.5%), Victoria (6.8%) and Vancouver (10.6%).

Besides the Toronto and Hamilton indexes included in the composite index, indexes exist for the seven other urban areas of the Golden Horseshoe. In July, two of these (Barrie and Oshawa) were, like Toronto and Hamilton, below their peaks of Q3 2017. Indexes not included in the composite index also exist for seven markets outside the Golden Horseshoe, five of them in Ontario and two in B.C. The 12-month rise of these indexes varied widely, from 2.4% for Thunder Bay to 17.6% for Abbotsford-Mission.

 

[1]  Note on methodology: The current-month data used to calculate the index are those of closed sales entered in the provincial land registry. To illustrate the home price trend, the published indexes of the 11 metropolitan markets entering into the Teranet–National Bank Composite House Price Index™ present moving averages of the last three months of raw indexes, a procedure that evens out month-to-month fluctuations. For our full methodology, please visit www.housepriceindex.ca

[2]  These more granular data are available upon request, possibly subject to subscription fees.

Metropolitan area Index Level
% change m/m % change y/y From peak Peak date
Report By:

Marc Pinsonneault
Senior Economist
Economics and Strategy Group
National Bank of Canada

The Teranet-National Bank House Price Index™ thanks the author for his special collaboration on this report.

The historical data of the Teranet-National Bank House Price Index™ is available™ at www.housepriceindex.ca.

The Teranet-National Bank House Price Index™ is estimated by tracking observed or registered home prices over time using data collected from public land registries. All dwellings that have been sold at least twice are considered in the calculation of the index. This is known as the repeat sales method; for a complete description of the methodology, contact us.

The Teranet-National Bank House Price Index™ is an independently developed representation of average home price changes in eleven metropolitan areas: Victoria, Vancouver, Calgary, Edmonton, Winnipeg, Hamilton, Toronto, Ottawa-Gatineau, Montréal, Québec City, Halifax. The national composite 11 index is the weighted average of the eleven metropolitan areas. The weights are based on aggregate value of dwellings as retrieved from the 2011 Statistics Canada Census. According to that census1, the aggregate value of occupied dwellings in the metropolitan areas covered by the indices was $1.168 trillion, or 53% of the Canadian aggregate value of $2.207 trillion.

All indices have a base value of 100 in June 2005. For example, an index value of 130 means that home prices have increased 30% since June 2005.

1 Value of Dwelling for the Owner-occupied Non-farm, Non-reserve Private Dwellings of Canada.
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The Teranet-National Bank House Price Index™ is an independently developed representation of the rate of change of Canadian single-family home prices.  The measurements are based on the property records of public land registries. The monthly indices cover eleven Canadian metropolitan areas: Victoria, Vancouver, Calgary, Edmonton, Winnipeg, Hamilton, Toronto, Ottawa-Gatineau, Montréal, Québec City, Halifax. The metropolitan areas are combined to form a Canadian composite index.

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